The government plan to cut the property transfer fee (BPHTB) to 1 percent in its fourth economic stimulus package, also slashing tax on real estate investment trustees (REITs) to almost zero.
The government included REITs in its fifth economic policy package in October 2015, Coordinating Economics Minister Darmin Nasution said, adding that it removed double-taxation schemes within REITs in hope of attracting new investors.
“The Finance Minister cut the REITs tax to 0.5 percent. Then the government asked local administrations to lower BPTHB to 1 percent, Darmin said on Monday after a cabinet meeting.
However, regional authorities seem reluctant to follow the new policy, claiming that the fee is a primary source of revenue. In Banten province, BPHTB is the second largest source of income after property tax (PBB). BPHTB contributes to almost 30 percent of its total regional revenue (PAD), data shows.
The incentive is designed to encourage investment managers to come up with a precise calculation before putting money into the property sectors, according to Bank Indonesia.
“No more double taxation. The total will be 1.5 percent for BPHTB and REITs,” Bank Indonesia governor Agus Martowardjojo said.