Indonesia will waive value-added Taxes on new home sales, its latest move to spur property investments and jump-start economic activity. The government has temporarily cut the value-added tax (PPN) on new homes in a bid to boost consumer spending in property. Consumer spending is the key driver of the economy and contributes more than 50% to GDP.

The government officially provides tax incentives in the property sector that can absorb houses that are ready-to-live or ready stock, so as to reduce the number of houses that developers are stocking now.

The Finance Minister Sri Mulyani Indrawati said during this joint press conference with the Coordinating Economic, Industry, and Public Works and Housing Ministers on 1 March. “The government, through this incentive, is encouraging household purchasing power and consumption, especially among the middle-class.” She also said that the government needed to allocate Rp 5 trillion for the PPN cut. The ministry recently issued the Finance Ministry Regulation No. 21/2021 regarding the PPN cut for landed houses and low-cost apartments purchased between March 1 and August 31. The tax will be cut 100% for houses price below Rp 2 billion and 40% for houses price between Rp 2 billion and Rp 5 billion, which is believed to account for the majority of the domestic demand.

The regulation caps the incentive to one house per citizen and forbids owners from reselling the house within a year of purchase. “This has been done to encourage the sales of houses that were built by developers last year and this year but which have not yet been absorbed by the market.” Said the Minister of Public Works and Housing (PUPR) Basuki hadimuljono, adding that around 27,000 such houses were eligible for the tax cut.

The incentive is only given to houses that have the following criteria, among others, to houses that have a maximum selling price of IDR 5 billion and are submitted physically during the incentive period.

Minister Basuki added, the policy for tax incentives on new homes under Rp 5 billion complements another policy that has been carried out by the government for the housing sectors, especially low-income community houses (MBR). “For MBR houses, the VAT has been exempted to 0% and added by Rp 4 million in cash for the cost of BPHTB (Transfer Tax for Land and Building), notaries, and so on.” he added. On the same occasion, Minister Mulyani said, “The provision of incentives for middle and upper-middle-class houses is now granted because the government has provided incentives for low-income housing earlier.


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