Real Estate Taxes in Bali: Key Obligations for Developers

December 18, 2024

Bali taxes for real estate developers usually go through two phases when completing a project: the development phase, which focuses on construction planning, and the operational phase, which covers when the property is ready to be handed over to the end consumer.

Each phase has different Taxes for property developers in Indonesia reflecting the activities carried out during that time:

Let’s see how these taxes differ in this PT PMA tax guide!

Real Estate Taxes in Bali for Developers: What You Need to Know

As a real estate developer, you’ll encounter two aspects of taxes during each phase of your project: the National Taxes and the Regional Taxes. Let’s dive into the details.

The development phase focuses on planning for construction, while the operational phase focuses on when the property is ready for delivery to the end consumer. Each phase has distinct tax obligations reflecting the activities carried out during that time. Let’s dive into the details.

Key Tax Obligations for Real Estate Developers in Bali

1. Development Phase Tax Obligations: BPHTB, KMS, and More

In this phase, taxes will be added from the planning to the construction stage.

BPHTB: Let’s say you are buying land for your real estate project. BPHTB is a tax imposed on the acquisition of land and building rights and is included in the planning stage. The BPHTB rate is 5% of the acquisition value or the transaction price.

Kegiatan Membangun Sendiri (KMS): It refers to the tax applied to developers’ self-managed construction activities. The rate for KMS is 2.2% of the total construction cost, after excluding the price of the land. Read the full information about this type of tax in our next post!

PPh 23: This tax is imposed on payments for certain professional services, such as architects, consultants, and other service providers (business entities). The rate for PPh 23 is 2% of the transaction value.

Example Calculation:

Payment to Architecture: IDR 500,000,000

PP 23 Calculation:

Tax Amount = 2% of IDR 500,000,000

PPh 23 = 0.02 x IDR 500,000,000 = IDR 10,000,000

PPh 21: This tax applies when hiring services or experts individually (not a business entity), such as construction workers or site managers. The employer withholds the tax from the employee’s wages and pays it to the tax authorities. The rates for PPh 21 are progressive, meaning they increase with the income level. If you hire subcontractors rather than individual employees, you do not need to withhold PPh 21 for those subcontractors. The subcontractor is responsible for their tax obligations.

PBB: The Land and Building Tax is imposed on property owners based on the value of their land and buildings. Each region in Indonesia may have its specific rates and rules regarding PBB. As a developer, you are responsible for paying PBB if the property has not yet been rented or sold. This responsibility continues until the property is leased or transferred to a new owner.

2. Operational Phase Taxes: VAT, Advertising Tax, and PPh Final

Advertising Tax: When you install billboards or other advertising materials to promote your development projects, you must pay advertising Real estate taxes in Bali. These taxes, which vary by region, are managed by local governments, and rates can differ based on the type and size of the advertisement. Check the specific requirements in your area or consult with your agent to avoid fines.

VAT 12%: Suppose a developer is certified as a Taxable Entrepreneur or PKP (businesses with a minimum gross revenue of IDR 4.8 billion annually). In that case, they are required to collect a Value-Added Tax (VAT) of 12% on the transaction value starting in 2025.

PPh Final (Income Tax):
1. Final Income Tax on Property Sales 2.5%: A final income tax of 2.5% of the total transaction value must be paid when a property is sold. This tax is classified as a national tax paid by the seller.
1. Final Income Tax on Property Rentals 10%: A final income tax of 10% of the total transaction value is applied if a property is rented. This is also a national tax.

Avoiding Bali tax obligations

Neglecting Bali tax obligations can have serious repercussions for developers. Here’s what you might face if taxes are not adequately paid:

Fines and penalties that can significantly impact your project’s budget.
Legal complications affect business operations and reputation.
A delay in your development timeline.
May result in suspension or revocation of business licenses.
For a PT PMA holder, you might also get deported.

Need help navigating Bali taxes for real estate developers?

Each phase of your project journey has its own Bali taxes you’ll need to follow for real estate developers. Staying on top of these requirements helps you avoid unnecessary headaches and ensures your project runs smoothly from start to finish.

If you’re overwhelmed by tax regulations or want to ensure you’re covering all your bases, Usaha Expat is here to help. Our team of experts knows the ins and outs of Bali’s tax landscape and can guide you through every step with our Tax Accountancy for PT PMA. We’re here to ensure your business stays on track and thrives in Bali’s vibrant real estate market.

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