IndonesiaDownload Full Scorecard
Goal – A comprehensive regulatory framework that is transparent, efficient, simple in its implementation and that leads to accurate reporting of property values and prudent protection from markets risks
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Core Question: Do market participants feel the overall tax rate is fair and participate in formal transactions?
High overall tax rates and transfer tax remains a hindrance in Indonesia, while Foreigners are only allowed to own land under special circumstances and status.
Transfer Tax (Weak)
6.1.1 What is the total property transfer tax including all duties and payments?
Overall Tax (Weak)
6.1.2 What is the overall tax rate on entrepreneurs?
32.2% Ranked 137 out of 188; Trend ↓
Source: Doing Business 2014 – Paying Taxes & Registering Property, World Bank
SQ 24 What is the tax on profits for foreign investors when divesting property?
Foreigners are allowed to own property, however only under special circumstances. Nonresident individuals’ rental income is subject to withholding tax at 20%, which is applied to the gross income. Rents are also subject to Value Added Tax (VAT) at 10%. Capital Gains derived by nonresident individuals from selling real property are taxed at a flat rate of 20%. Residents are taxed on their worldwide income at progressive rates, from 5% to 30%. The Land Code states that any individual foreigner can own land in Indonesia with status of Hak Pakai (Rights of Usage) or through leasehold. The Hak Pakai can be applied to either government land or Hak Milik (Freehold) land. Only Indonesian citizens may own land (property) with the title of Hak Milik (Freehold Title).
Source: Global Property Guide – Indonesia
Core Question: Are the professional services necessary for efficient and transparent property markets available and appropriately regulated and supervised?
There are tests and valuation standards for Asset Valuers, however most Brokers & Agents are unregulated and regulation is slowly emerging. In addition, Mortgage loans are regulated by licensed professionals.
SQ 25 Are property valuers licensed and/or certified by the government?
In Indonesia, there is a valuer certification test (USP) administered by the Indonesian Valuer Professional Society (MAPPI) in order to implement the Decree of the Minister of Finance Number 57/KMK.017/1996. This is a breakthrough to provide temporary solutions to determine the minimal quality of a valuer’s qualification. Many foreign real estate companies such as DTZ, Colliers and Knight Frank provide valuation and consultancy services in Indonesia.
SQ 26 How effective are mechanisms in place to discipline valuers who engage in misconduct?
The Indonesia Valuation Standard (Standar Penilaian Indonesia – SPI) are the guidelines that must be studied and implemented by a valuer to serve in conducting valuation.
Civil Society Resource: Valuation Practices in Indonesia – Penilai Indonesia
Brokers & Agents (Weak)
SQ 27 Are real estate brokers and agents licensed and/or certified by the government?
No. The Real Estate Brokers Association of Indonesia (AREBI) conducts training and disciplinary procedures. AREBI has petitioned the government to consistently follow up regulation on the obligation to possess Property Brokerage License (SIU-P4) since with such requirement, the movement of property brokerage companies would be smoother and more orderly.
SQ 28 How effective are mechanisms in place to discipline brokers or agents who engage in misconduct?
At present, property sales are without definite regulation, however through the act of each broker having a license, the state will also be able to benefit from tax revenue. The regulation is designed by the government in Regulation by Ministry of Trade No.33/M-DAG/PER/8/2008 and with such regulation; companies will be obliged to have licenses to run their business. AREBI members will hopefully be able to obtain their licenses within one year since many property agents have yet to apply for membership. AREBI predicts it only manages around 10% from the current number of property agents in Indonesia.
Civil Society Resource: Real Estate Brokers must have Property Brokerage License – Bisnis Indonesia
Mortgage Professionals (Strong)
SQ 29 Are mortgage professionals licensed and/or certified by the government?
Mortgage loans are regulated and available while mortgage banks (local and foreign) and licensed professionals are ready to offer services such as home loans, property financing, mortgage solutions, etc. In late 2013, Bank Indonesia (BI) issued new regulation on mortgages in an effort to help relieve property speculation and reduce fraud. The central bank introduced fresh minimum down payment rules for second properties. The LTV ratio for the purchase of a second property will be cut to 60 percent and 50 percent for purchases past the second property. On the other hand, clients will also be required to declare their preceding mortgages when in search for new loans.
Sources: In Indonesia, New Mortgage Rules Aim to Cool Market – World Property Channel
SQ 30 How effective are mechanisms in place to discipline mortgage professionals who engage in misconduct?
Misconduct leads to revocation of license.
Core Question: Are capital markets well-regulated and diversified enough to provide financial resources to private-sector entrepreneurs and innovators?
Indonesia is strongly open to FDI investment, transparent in bankruptcy laws protecting borrowers and lenders (facilitates lending), and reflects strong securitization of GDP.
Capital Flows (Strong)
6.3.1 How restricted is the flow of capital into and out of the country?
Ranked 61 out of 148; Score 4.6 out of 7
Source: Index of Economic Freedom 2014, Heritage Foundation – http://www.heritage.org/index
Securities Exchanges (Strong)
6.3.2 Is the regulation of securities exchanges transparent, effective and free of influence from government and industry?
Ranked 57 out of 148; Score 4.3 out of 7
Source: The Global Competitiveness Report 2013-2014, World Economic Forum
6.3.3 What is the depth of asset-backed securities, mortgage-backed securities, high-yield bonds and highly leveraged loans?
Ranked 16 out of 62 countries; Score 2.6 out of 7
Source: Financial Development Report, World Economic Forum