Indonesia is changing its rules on taxing luxury properties. In this move that could iron the uncertainty that is plaguing the real estate sector, certain apartments and houses are now to be valued based on value instead of size, The Business Times reports.
Basing on the new ministerial decree, houses that are valued at 20 billion (S$2.04 million) or more are to be subjected to 20% luxury tax. This luxury tax rate was used to be imposed by the finance ministry on properties that are 350 square meters (3,770 square feet) or larger.
Now, apartments that cost 10 billion rupiah or more are also subject to luxury tax, as opposed to the previous threshold of 150 square meters minimum size. "We have suggested to keep calculating the luxury tax by land size and building size because it is fairer. If the tax is calculated according to price, in 10 years the price wouldn't be applicable anymore," says vice chairwoman of business association Real Estate Indonesia Theresia Rustandi to Reuters on Wednesday. "But for us property developers, what is important is certainty. At least the regulation is out and it makes it clearer for the market to move," she added.
Discussions on these newly applied rules on luxury tax have been going on for months until last week when it was finally presented. Real Estate Indonesia is not in favor of the changing of rules and had lobbied the finance ministry in more than one occasion.
But Finance Minister Bambang Brodjonegoro stood firm on the decision explaining that the old rule was not fully effective as it leaves small but pricey apartments in the center of Jakarta untaxed.
The government of Indonesia, Southeast Asia's largest economy, is struggling to meet its target revenue for 2015, which experts said was unrealistically high to begin with.