Government Cuts Government-Borne VAT Incentives for Houses to a Maximum of 50%

The Government-borne Value Added Tax (PPN DTP) facility for landed houses and apartment units, has been extended for nine months, until the tax period in September 2022.

Previously, the facility, which aims to encourage the property industry, only applies to the transfer of new landed house during the March to December 2021 tax period.

The provision regarding the extension of this facility is contained in the Minister of Finance Regulation (PMK) Number 6/PMK.010/22, which was promulgated on 2 February 2022. The issuance of this regulation also revokes the previous provision, namely PMK Number 103/PMK.010/21.

Although it is extended, the amount of government-borne VAT is actually cut to only a maximum of 50% from the previous one which could reach 100%, depending on the selling price of the house.

Selling Price for Houses	Old Rule	New Rule
Maximum IDR 2 billion	Government-borne VAT of 100%	Government-borne VAT  of 50%
Above IDR 2 billion to IDR 5 million	Government-borne VAT of 50%	Government-borne VAT of 25%

Read: VAT Incentives for Houses and Apartments Extended to The End of The Year

Stricter Terms

In addition to reducing the number of incentives, the government also tightened the terms of its provision. Because there are some criteria that were not set before, added in the latest regulation.

For example, a VAT-Registered Person who transfers landed house or apartment units must first register with the ministry administering public housing and residential area sectors or the Public Housing Savings Management Agency (BP Tapera), no later than 31 March 2022. In the previous rules, this requirement did not exist.

At the time of registration must be accompanied by information on the details of the available houses, both those that are ready to be handed over and those that are still in the building process. In addition, information related to the estimated selling price of the house must also be included.

Meanwhile, in general, the conditions that must be met to get the facility are still the same, only the submission period is adjusted to the validity period of the rules.

1. Handover Period

Tax deductions can be given if the handover of the house is carried out during the January-September 2022 tax period.
However, houses whose down payment or installments are paid before that period still can get the facility.

The condition is that the down payment is paid not more than 1 January 2021 and the minutes of signing the notarial sale or purchase agreement are made between 1 January 2022 to 30 September 2022.

The minutes must then be registered on the application provided by the ministry administering public housing and residential area sectors, maximum at the end of the following month, after the handover.

2. Housing Identification Code

The government-borne VAT facility can apply if the house handed over has received a housing identity code. The code will be issued by the ministry administering public housing and residential area sectors.

3. First Handover

The government-borne VAT can be enjoyed for the transfer of the first house. This means that houses that have been transferred cannot get the facility.

4. Number of Housing Units

This facility only applies to the transfer of one housing unit for one individual.

5. Making Tax Invoices

VAT-registered persons who act as sellers are also obliged to make two tax invoices. The first tax invoice is filled with transaction code 01 for the part that does not get the facility, which is 50% for a house selling price of up to IDR 2 billion, 75% for a house selling price of IDR 2 billion to IDR 5 billion.

The second invoice is completed with transaction code 07 for the part that gets the facility, which is 50% for the transfer of houses with a maximum value of IDR 2 billion and 25% for houses with prices above 2 billion to IDR 5 billion.

6. Making Realization Report

VAT-registered person's entrepreneurs who take advantage of this facility must also make a report on the realization of the use of the government-borne VAT by submitting a VAT Periodic Tax Return no later than 31 October 2022.

7. Not Transferable

Houses that have been handed over with the government-borne VAT facility may not be transferred or resold within one year from the date of transfer.

If all of the above-mentioned conditions are not fulfilled, the VAT payable arising from the transfer of the house will not be borne by the government. Thus, the sale of the house is still subject to VAT at the rate that has been set in the applicable tax law.