The joy of tax: 3 things we’ve learned about real estate taxes in Indonesia

Tax amnesty, tax havens and luxury taxes in Indonesia – it’s all going on

Tax, the second most interesting word in the English language ending with ‘x’, is cropping up in Indonesian property news a lot lately.

With current growth figures nothing to celebrate – a far cry from just two years ago when Jakarta, Indonesia’s bustling capital, was named the fastest growing luxury property market in the world by Knight Frank – tax initiatives have formed part of the effort to get things back on track.

With a little help from our friends at Jones Lang LaSalle Indonesia, here’s a summary of what we know about the current state of affairs:

1. The tax amnesty is proving successful

After sluggish beginnings, the highly anticipated tax amnesty, enacted in June, now looks to be the most successful ever, with IDR 3,621 trillion declared; around 90 percent of the IDR 4,000 trillion target that had been set for 30 September.

“While this has not yet translated into a pick-up in residential sales, we expect to see strong sales growth in the next 6 to 12 months,” JLL’s Q316 report said of the amnesty.

Those who have saved in the amnesty are being encouraged to pour their money back into real estate, with Financial Services Authority head Muliaman Hadad saying the market value of Indonesian REITs “would be promising for years to come after the easing on tax burden.”

More: Singapore home market unaffected by Indonesian tax amnesty

2. Tax havens probably won’t happen

While a certain amount of buzz was created around the possibility that Indonesia may make tax havens out of islands Bintan and Rempang, Todd Lauchlan, country head of JLL Indonesia said he’s “skeptical” that these will ever go ahead, feeling there is little point as Singapore plays this role for Indonesians already.

3. Luxury taxes mean condo demand is largely in the middle and lower segments

While the macro environment may have improved, super luxury and luxury taxes remain in place meaning the upper end of the market continues to experience weak sales.

Buyers are now attracted by affordability and lower tax burden, and new developments are mirroring this. There have been only a few high-end launches since mid-2015, and there is an overall decrease in new condominium launches in 3Q16, with only 600 new units (way down from almost 3000 in Q2). While the average sales rate has fallen steadily, it remains healthy compared to many other markets.

Read next: Herman Nagaria to receive Indonesia’s Real Estate Personality 2016 award

Tax and real estate law will be one of the discussions in the next Property Report Congress on 13 October 2016 at the Fairmont Jakarta. The whole-day conference Property Report Congress Indonesia is a dedicated, high-level forum for industry leaders, VIPs, and real estate professionals to discuss how to continue driving growth and excellence in one of the world’s dynamic real estate markets. For tickets, partnerships and enquiries, visit the official website or contact [email protected].

Source: Property Report