Renting out property in Indonesia to earn money on your investment is attractive. But before renting out your property, you must know the rental income tax Indonesia applies. There are several tax liabilities for renting property as a foreign individual, such as the property Rental Income Tax or Lease Tax. As Indonesian real estate taxes can be hard to understand, this article discusses the various taxes foreigners pay when renting or leasing property in Indonesia.
What is the property rental income tax in Indonesia?
There are three property rental income taxes in Indonesia that you should know about:
- Personal Income Tax (PIT)
- Withholding Tax (PPh)
- Corporate Income Tax (CIT)
1. Personal Income Tax (PIT)
Foreigners staying more than 183 days within a year in Indonesia are considered Indonesian tax residents. Tax residents must pay Personal Income Tax, called Pajak Penghasilan Orang Pribadi, which follows a progressive tax system based on their annual income. Indonesia’s Personal Income Tax rate ranges from 5% to 35%, depending on the yearly income.
Income generated with rental properties is taxed as Personal Income Tax unless the individual is a non-resident taxpayer. In that case, the taxpayer pays a Withholding Tax, sometimes called Rental Income Tax or Lease Tax. The PIT should be filed by March 31 of the following year, while the payment deadline is on the 10th of the following month.
The following table provides an overview of the Personal Income Tax rates for tax residents in Indonesia.
|Up to IDR 60 million ($3,900)||5%|
|IDR 60 million ($3,900) – IDR 250 million ($16,250)||15%|
|IDR 250 million ($16,250) – IDR 500 million ($32,500)||25%|
|IDR 500 million ($32,500) – IDR 5 billion ($325,000)||30%|
|Over IDR 5 billion ($325,000)||35%|
2. Withholding Tax (PPh)
The rental income of non-resident individuals in Indonesia is subject to a Withholding Tax of 20% of the gross rental income. Even if a non-resident has no permanent residence in Indonesia, they still need to pay taxes on any income they earn inside Indonesia. The 20% Withholding Tax is the default rate and applies unless a Double Tax Agreement (DTA) exists between Indonesia and the non-resident’s home country. The PPh should be filed by the 20th of the following month and paid by the 10th of the following month.
With a DTA, the tax rate for non-resident individuals may be reduced. The DTA helps promote cross-border trade and investment by reducing tax barriers for individuals and businesses in multiple countries. The height of the reduction varies per country.
|Withholding Tax||Tax rate|
3. Corporate Income Tax (CIT)
Corporate Income Tax rates are imposed on foreign-owned companies, known as PT PMAs. While, as a general rule, foreigners are not allowed to own properties in Indonesia, a PT PMA is one of the exceptions. An established PT PMA generally pays a flat rate tax of 22%. The CIT should be filed by April 30 of the following year, while the payment should be performed by the 10th of the next month.
|Income from property||22%|
Do you want to know more about property taxes in Indonesia?
This article is part of our series on Indonesian property taxes, explicitly discussing rental income tax in Indonesia. Read more about property taxes in Indonesia:
- Complete tax guide
- Taxes on buying real estate in Indonesia
- Taxes on selling property in Indonesia
- PT PMA and corporate taxes in Indonesia
Handle property taxes in Indonesia with Own Property Abroad
Are you considering starting a property rental business in Indonesia? Let Own Property Abroad be your guide to a smooth and stress-free journey in the property world. Our deep understanding and hands-on experience in the Indonesian market equip us to support you with legalities, such as rental income tax in Indonesia, property discovery, and property management.
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Frequently Asked Questions (FAQs)
How much is the tax on rent in Indonesia?
The tax on rent in Indonesia depends on tax residency. Indonesian tax residents pay a Personal Income Tax ranging from 5% to 35%, while non-resident individuals pay a Withholding Tax of 20% (unless a DTA is in place). Corporate Income Tax at 22% is paid if the PT PMA holds the property.
How much tax do you pay on rental income in Bali?
The tax you pay on rental income in Bali depends on the tax residency. Indonesian tax residents pay a Personal Income Tax ranging from 5% to 35%, while non-resident individuals pay a Withholding Tax of 20% (unless a DTA is in place). Corporate Income Tax at 22% is paid if the PT PMA holds the property.
Do foreigners have to pay taxes in Indonesia?
Foreigners might have to pay taxes in Indonesia. Foreigners with a foreign tax residency are only taxed by the Indonesian government on the income they earn inside Indonesia. These non-resident individuals must pay a general Withholding Tax of 20% on any income earned from sources within the country.