Final Income Tax on the Transfer of Land and/or Buildings

The transfer of rights to land and/or buildings (PHTB) is one of the objects subject to final income tax (PPh). In general, PPh on PHTB is imposed on the amount of income received or earned by the party who transfers (the seller) the rights to land and/or buildings.

The provisions for the final PPh on PHTB are regulated in Article 4 paragraph (2) letter d of Law no. 36 of 2008 concerning Income Tax stated Law no. 7 of 2021 concerning Harmonization of Tax Regulations ( PPh Law stated UU HPP ). However, the rules regarding tariffs, tax bases (DPP), and the party making final income tax withholding are listed in the implementing regulations, namely PP 34/2016 and PMK 261/2016.

Referring to Article 1 paragraph (2) PP 34/2016 in conjunction with Article 1 paragraph (4) PMK 261/2016, income from PHTB can be defined as income received or earned by the transferring party through sale, exchange, relinquishment of rights, transfer of rights, auction, grant, inheritance, or other means agreed between the parties.

In calculating the income tax payable, the taxpayer can multiply the rate with the DPP. The PHTB final PPh rates vary based on the type of PHTB activities. The description of the fare is as follows.

In addition to the tariff, the value that is the basis for calculating PHTB also varies, depending on the type of transaction that underlies the PHTB. The value of PHTB in question can be divided into 5 as follows.

Furthermore, by Article 3 paragraph (1) of PP 34/2016, individuals or entities that receive or earn income from PHTB are required to deposit the income tax payable themselves. The final income tax payable is deposited to a bank/post of perception before the deed, decision, agreement, or minutes of the auction on PHTB are signed by the authorized official.

However, if the recipient of the income is transferred to the government, the final PPh will be deducted from the income by the government treasurer or the official who made the payment, or the official who agreed to the exchange.

It should also be noted, based on Article 3 paragraph (2) of PP 34/2016, for individuals or entities whose main business is conducting PHTB and receiving or earning income from PHTB, the time when the final PPh becomes due is when part or all of the payment for the transfer is received.

Final PPh is calculated based on the amount of each payment including advances, interest, levies, and other additional payments fulfilled by the buyer, in connection with the transfer. Final income tax payable must be deposited by the individual or entity concerned to the state treasury no later than the 15th day of the following month after the month the payment is received.

However, not all taxpayers who transfer land/building rights are subject to final PPh PHTB. 7 parties are excluded from the imposition of final PPh on PHTB. First, individuals who earn below non-taxable income (PTKP) and make transfers with a gross amount of less than Rp. 60 million. The gross amount is not a broken-down amount.

Second, individuals who transfer by way of grants to blood relatives in a straight line of one degree, religious bodies, educational bodies, social bodies including foundations, cooperatives, or individuals who run micro and small businesses. Grants can be made as long as there is no relationship with the business, ownership, or exploitation between the parties concerned.

Third, agencies that transfer by way of grants to religious bodies, educational bodies, social institutions including foundations, cooperatives, or private individuals who run micro and small businesses. Grants can only be made if there is no relationship with the business, ownership, or exploitation between the parties concerned.

Fourth, transfer due to inheritance. Fifth is the agency that performs the transfer to merge, consolidate, or expand businesses using the book value. Sixth, an individual or entity that performs the transfer in the context of implementing a building-to-delivery agreement, building-use-handover, or the use of state property in the form of land and/or buildings. Seventh is an individual or entity that is not a tax subject.

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