Stamp duty is one of many taxes imposed in Indonesia. It is imposed on legal documents. Stamp duty rates vary depending on the nature of the document on which the tax is imposed. It enables the owner of a particular document or asset to receive complete ownership rights to that document or asset.
Definition of Stamp Duty
Stamp duty is a levied tax on different legal documents which have different fixed rates. It is usually a government tax levied at the time of registration of an acquired property so that its owner can have legal possession or ownership on that document or asset. The stamp duty in Indonesia is often paid in full to show evidence for the purchase or sale of the property. During the property exchange, it is required that both the buyer and seller share the cost of the stamp duty equally. Some of the stamp duty rates in Indonesia are the following:
- Values of up to 250,000 rupiah have no stamp duty
- Values of 250,001-1,000,000 rupiah have a stamp duty of 3,000 rupiah
- Values of over 1,000,000 have a stamp duty 6,000 rupiah
Notary fees are often demanded for the processing of legal documents. The charges for transactions range from 0.5% to 1.5% of the total transacted prices. Other areas that require payment of stamp duty include acquisition of land or buildings. The land and building transfer duty costs 5% of the total transaction. The percentage can be computed from either transaction value or assessed value, depending on which value is higher.
Generally, stamp duty is the same as income tax since it is also collected as tax by the government. A delay in paying stamp duty in Indonesia can cause penalties to be imposed.
Stamp duty is one of several taxes that comprise Indonesia’s tax system. Should you have any other questions regarding taxation in Indonesia, you may contact Paul Hype Page & Co. Our tax experts will inform you about tax rates, tax obligations, and anything else you may need to know about taxation in Indonesia.
According to the Indonesian constitution’s Article 2.1 (1.a) on the law governing stamp duty, it is often imposed on “contract letters and other letters made for the purpose of being used as an evidence tool of private-natured conduct, facts or conditions”. Therefore, it is evident that stamp duty is imposed on contracts to legalize the transactions and for evidence purposes. Stamp duty is not only used for evidentiary requirements but also remains relevant within the territories of Indonesia. For further clarification, Article 5 (c) of the stamp duty law states that “A stamp duty is due to be paid for a document made abroad, when it is used in Indonesia.” According to Article 11 (1) of the Indonesian law on stamp duty, if the duty stamp is not sealed, it does not nullify the transaction; neither does it make the transaction void. However, the law further states that such contracts would not, in case of any problem, be considered by any government officials. In such a situation, a case about the contract cannot be brought before the judges, court, registrar, notary or any, other public authority. Contracts that do not bear the stamp duty levied on them are unacceptable in Indonesia.
Stamp duty in Indonesia serves two critical conditions in a contract. The conditions include whether the parties intend to use the stamp duty for evidentiary purposes, which is vital in case of any problems about the property acquisition. It provides evidence to show that there a mutual and acceptable deal between the two parties during a transaction. The other is considering whether it will be used in Indonesia. If such is the case, then the stamp duty is mandatory.
On the other hand, if the contract is signed abroad, stamp duty no longer becomes a requirement; for instance, if the sale and purchase of property was done outside Indonesia. It is the case since any dispute concerning transactions which are completed abroad will not necessarily be arbitrated in Indonesia, further noting that the property does not have to necessarily be in Indonesia but abroad. On the other hand, if the contract entails an entity or property located in Indonesia, then stamp duty will be imposed. In such a situation, the stamp duty will be necessary since any dispute arising will be solved in an Indonesian court because the property is located within Indonesia’s borders.
Imposition of Stamp Duty in Indonesia
Documents are charged a stamp duty tax fee of either 3,000 rupiah or 6,000 rupiah. The documents on which stamp duty is imposed include receipts, agreements, and other powers of attorney. Stamp duty taxes in Indonesia are imposed on properties such as land, buildings, and property title transfers, among others.
Tax on Land and Buildings
This is a tax which is levied on the holding or exchange of land and buildings in Indonesia. It is the responsibility of the Indonesian authorities to determine the taxpayer and offer to the taxpayer a report on the object to be taxed. Normally, in case of any due tax, the owner will be held responsible and required to pay the tax. Currently, the tax rate is at either 20% or 40%, which implies that the stamp duty tax which will be levied on a property is 0.5% of the sales value on the tax object. The tax rate is 0.1% or 0.2% of the total tax rate. The sales value refers to the amount transacted and if there is no transaction, the applicable amount would be calculated with regard similar object. The property values are often expected to be fixed for at least three years, although there are some exceptions as there are values that remain fixed for just one year.
Title of Property Transfer
A tax transfer is payable when there is a transfer of any title of land, buildings, or both. The recipient of the rights is the taxpayer. Unlike the tax on land and buildings, the title transfer duty tax is charged at 5% of the price. It is also crucial to note that such transactions have a non-taxable amount of 60 million rupiah. The acquisition cost is usually the amount which is taxed. However, if the sales value is higher, then the amount would be used for the tax transfer.
Other areas that require regional and local taxes include entertainment, advertisement stamp duties, motor vehicles, and hotels, among others.
How Stamp Duty Is Paid in Indonesia
The payment of stamp duty in Indonesia is defined in Article 6(2a) of the stamp duty laws. It states that it is to be done via a stamp duty seal.
Documents that require stamp duty payments include the following:
- Notarial deeds
- Deeds made by the land office
- Documents valued at 250,000 rupiah or more
- Other securities such as bills and other documents with monetary value
The notarial fee is dependent on the value of the notarial deed. The payments are as follows:
- Any payment of up to 100 million rupiah – 2.5% of the total value
- Any payment of 100 million to 100 billion rupiah – 1.5% of the total value
- Any payment of over 100 billion rupiah – 1% of the total value
If a contract required stamp duty but did not have it imposed, the deal is still not permanently cancelled. Indonesian stamp duty law allows the duty to be paid in contracts when it is already due through a process known as nazegelen. The process is regulated by PMK 70/2014. According to this requirement, the stamp duty is placed in a contract on any available space before its submission to the post office. The government through the Ministry of Finance regulates the post-stamp payment procedures as per the PMK 03/2014.
The cost of stamp duty fees in Indonesia is 0.2% when dealing with property transfers. The transfer tax is 5% while legal fees are charged at 0.5% to 1.5%. Comparing these figures to those of neighboring countries reveals notable information. For example, in Singapore the amount will depend on the price of the property in question. The rate is 1% if the property is valued at S$180,000 or less, 2% for the next S$180,000, and 3% for the next S$640,000. A foreigner would be charged 20% when acquiring a property, while a PR purchasing a first residential property is taxed at 5%. Vietnam also charges depending on property value. Evidently, the stamp duty is arguably cheaper in Indonesia compared to its neighboring countries. Stamp duty is even avoidable for those who do not require any evidence of the property acquisition. Alternatively, some may choose to have the stamp duty in contracts.
In summary, stamp duty in Indonesia acts as a governmental tax on properties and other documents for legalization purposes. It also acts as evidence of the legal acquisition of the property on which the levy is imposed. The rate of stamp duty is not likely to as it is tied to the value of the property involved. The amount of stamp duty charged against a similar property would vary with the variation of the real value of the same property over a certain period. Otherwise, the rate of stamp duty in Indonesia is not likely to change. Depending on whether the transaction is within Indonesia or outside, the details of stamp duty are essential when a court case would emerge. When the situation is doubtful, Indonesian authorities will step in to aid in the process of arbitration.
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