However, it is essential to note that an application to legalize documents may be rejected if the documents are in the following condition: 

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• the specimen is not suitable;

• documents are unreadable;

• information is not in line with uploaded documents; and/or

• there is a report which indicates misuse of data and information by the applicant.

 

If documents are not legalized due to the abovementioned issues, the documents cannot be used either in the territory of the Republic of Indonesia or abroad as a consequence. It is important to note that falsification of legalized documents is punishable by a maximum of 6 (six) years imprisonment.  Moreover, forgery of documents is punishable by a maximum of 8 (eight) years imprisonment if the following documents are forged: 

 

• authentic deeds;

• in debentures or certificates of debts of a state or part thereof or of a public institution;

• in shares or debentures or share certificates, debt certificates of an association, foundation, partnership, or company;

• in counterfoils, dividend or interest evidence belonging to one described document under the preceding numbers, or in evidence issued in substitution for these documents; and/or

• in credit or commercial papers intended for circulation.

 

The Role of Notary and Notarial Documentation

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The involvement of a notary is required in conducting transactions in various sectors. The notary is a public official who is authorized to make authentic deeds and has other powers, of which are referred to in Law No. 30/2004 .  In general, public notaries are generally authorized to prepare authentic deeds encompassing all actions, agreements, and stipulations mandated by laws or requested by the concerned party to be documented in an authentic deed.   Moreover, the notary is also authorized to guarantee the deed’s drafting date, keeping the deed, providing the grosse, copy, and except of the deed, as long as the making of the deed is not designated for exemption towards another official or other parties stated by the law. 

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The public notaries are also authorized to do the following matters: 
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• to validate the signature and set a specific date of the private letter by registering it in a particular book;

• to book personal letters by registering for a specific book;

• to make a copy of the original private letters in the form of a copy containing a written description in the said letter;

• to validate the compatibility of the photocopy with the original documents;

• to provide legal education in connection with the making of the deeds;

• to make the deeds relating to the land matters; and

• to make a deed of auction minutes.

 

However, it is essential to note that aside from the abovementioned, a notary is specifically required for the matters relating to the legal entities such as limited liability company, foundation, and cooperatives and land matters as follows.

 

The Role of the Notary in relation to the Existence of Limited Liability Companies

 

The Deed of Incorporation and Articles of Association of Limited Liability of Companies

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The notary must draft the deed of incorporation of limited liability companies in Bahasa.  Besides, the deed of incorporation shall include the AoA and other matters, as per the following: 

 

• full name, place, and date of birth, occupation, residential, and nationality of the individual founder, or name, domicile, and complete address, as well as the number and date of the MoLHR decree regarding the ratification of legal entity promotors of the company;

• full name, place, and date of birth, occupation, residential, and nationality of the first members of the BoD and the BoC to be appointed; and

• names of shareholders who have subscribed to the shares, the detail of the number of shares and nominal value of shares subscribed and paid-up.

 

Moreover, the AoA of the company must include the following matters: 

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• name and domicile of the company;

• purposes and objectives as well as the business activities of the company;

• the period of incorporation of the company;

• amount of authorized capital and issued capital, and paid-up capital;

• number of shares, shares classification if any, including the number of the shares for each category, rights attached to each share, and share nominal value;

• name of title or position and the number of members of the BoD and the BoC;

• determination of the place and procedures for holding a GMS;

• methods of appointment, replacement, and dismissal of the members of the BoD and the BoC; and

• the method for profit utilization and dividends distribution.

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If the shareholders intend to amend the AoA, the amendments shall be declared under a notarial deed in Bahasa.  However, it is essential to note that if the amendment is not drawn up in a notarial deed of minutes of the meeting, it shall be drawn up in a notarial deed no later than 30 (thirty) days following the date of the GMS’ resolution. 

​

It is worth noting that if the following amendments want to be made to the AoA, it must first obtain the approval of the MoLHR: 

​

• name and/or domicile of the company;

• purposes and objectives, as well as, the business activities of the company;

• the period of incorporation of the company;

• the amount of authorized capital;

• the reduction of issued and paid-up capital; and/or

• the change of the company’s status from private company to issuer, or otherwise.

​​

The MoLHR must be notified of any other amendments that are not mentioned above.  The notary shall submit an application for approval and/or notification of the amendment of the AoA to the MoLHR within 30 (thirty) days since the date of the notarial deed, containing the amendments of the AoA. 

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Transfer of Shares

 

The notary has an important role in the transfer of shares, as such a transfer will be conducted through a deed of transfer of rights.  The transfer of shares can be executed by way of sale, purchase, grants, or inheritance. Subsequently, the notary shall submit a notification of the change to the shareholding composition, due to transfer of rights, to the MoLHR within 30 (thirty) days of the registration date of such a transfer of shares. 

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Mergers, Acquisitions, Consolidations, and Spin-offs

 

The plan to conduct a merger, consolidation, acquisition, and/or spin-off, of which has been approved by the GMS, shall be set forth into a deed drawn up by notary in Bahasa.  In addition, the deed of acquisition, which is executed directly by the shareholders, shall be obliged to be stated in a notarial deed in Bahasa. 

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 In regards to consolidation, the relevant deed drawn up by notary shall be the basis for the  drafting of the new consolidating company’s incorporation deed.  The notary shall enclose the copy of the consolidation deed in the application to the MoLHR in order to obtain the MoLHR decree regarding allowing for the ratification of the consolidating company. 

 

The Role of Notary related to the Existence of Foundations

 

The Deed of Incorporation and Articles of Association of Foundations

 

The incorporation of foundations shall be carried out by means of an incorporation deed written in Bahasa.  The incorporation deed shall at least incorporate the AoA and the following matters: 

 

• the name and domicile of the foundation;

• the purposes and objectives;

• the period of incorporation of the foundation;

• the amount of initial assets separated from the personal assets of the founder in the form of money or goods;

• method of acquisition and utilization of how to acquire and use assets;

• the procedures used for the appointment, dismissal and replacement of members of the Governing Board/Pembina, the Executive Board/Pengurus, and the Supervisory Board/Pengawas;

• the rights and obligations of the Governing Board/Pembina, the Executive Board/Pengurus, and the Supervisory Board/Pengawas;

• the procedures for organizing a foundation’s organ meeting;

• the provisions regarding amendments to the AoA;

• the procedures used for the merger and dissolution of foundations; and

• the use of remaining assets upon liquidation or distribution of foundation’s assets after dissolution.

 

A foundation obtains its legal entity status upon the approval of deed of incorporation by the MoLHR.  The notary shall file an application of such approval to MoLHR within 10 (ten) days of the signing date of the foundation’s deed of incorporation. Such application shall be filed by the notary in writing.  The approval of this application will be delivered within 30 (thirty) days from its completion. 

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It is important to note that a foundation’s AoA may be amended, with the exception of the foundation’s aims and objectives.  Amendments to the foundation’s AoA can only be done following a Governing Board/Pembina’s meeting resolution.  Such a meeting can be convened if it is attended by at least 2/3 (two thirds) of the Governing Board/Pembina’s members. The amendment of AoA shall then be incorporated under a notarial deed in Bahasa. 

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In Merger Process

 

A merger regarding a foundation can be done by merging 1 (one) or more foundations with another, resulting in the dissolution of the merging foundations.  The proposal for foundation mergers can be submitted by the Executive Board/Pengurus to the Governing Board/Pembina.  A merger in relation to a foundation can only be carried out on the basis that the  Governing Board/Pembina’s meeting resolution was attended by at least ¾ (three quarters) of the Governing Board/Pembina’s members and was approved by at least ¾ (three quarters)  of the Governing Board/Pembina’s attending members. 

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The foundation merger plan must be approved by each foundation’s Governing Board/Pembina.  Upon approval, the said merger plan shall be incorporated under a merger deed, drawn up by a notary in Bahasa.  Such merger plan deeds shall be conveyed by a notary to the MoLHR, in order to obtain approval. This is done in case the merger is followed by an amendment to the foundation’s AoA, requiring the MOLHR’s approval.  The approval from MoLHR will then be provided within 60 (sixty) days from the date of the accepted application.  
 

The Role of Notary related to the Existence of Cooperatives

 

The incorporation of cooperatives shall be carried out by means of an incorporation deed containing the AoA. The AoA must, at least, cover the following matters: 

 

• a list of promotors;

• the name and domicile of the cooperatives;

• the purposes and objectives, as well as, the business activities;

• the provisions regarding membership;

• the provisions regarding membership’s meeting;

• the provisions regarding management;

• the provisions regarding capital matters;

• the provisions regarding the duration of association;

• the provisions regarding remaining results of operations; and

• the provisions regarding penalties.

 

Meanwhile, the amendment of a cooperative’s AoA are to be carried out based on the members’ meeting resolution.  Unless the AoA stipulate otherwise, the resolution can be carried out if the meeting is attended by at least ¾ (three quarters) of the members and approved by at least ¾ (three quarters) of the Governing Board/Pembina’s attending members. 

​

The MoCSME will provide a ratification of amendment to the cooperative’s AoA within 30 (thirty) days at the latest if: 
 

1. it does not contravene Law No. 25/1992; and

2. it does not contravene public order and decency. 

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The Deed, Legalization, and Waarmerking

 

Deed

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In the context of providing legal services to the public, a notary carries out their position, recording all legal events into an authentic deed, and automatically guaranteeing the certainty of the making of the deed, keeping the deed, providing grosse, copies and quotations of the deed. 

​

A deed functions as a proof of rights in the form of authentic written evidence made before or by an authorized official.  The power of the official will ensure that an agreement, stipulation, or a legal event made or carried out received legal certainty and protection.

​

Moreover, the authenticated deed will contain the rights and obligations of the parties. Should any dispute arise between the parties in the future, the authenticated deed can act as valid proof of said rights and obligations. 

 

Legalization

 

Legalization refers to the notary’s act of legalizing signatures and determining the certainty of the private letter’s date. The legalization is then recorded or registered into a special register.  Such special register will record signature validations and ascertain the date of documents relating to letters, lists, household affairs letters, and other writing documents that were made without intermediaries, or not performed made not in the presence of a public official. 

 

Waarmerking

 

Waarmerking is not clearly defined or regulated by the prevailing regulations in Indonesia. However, Law No. 30/2004 implicitly defines waarmerking as the act of registering private letters in a special register. In practice, the notary’s authorization is also known as the underhand registration of letters with the code: “Register”, or Waarmerking, or Waarmerk. 

 

The Role of Notary related to Land Transactions

 

The General Role of Notary in Land Transactions

 

A notary who is eligible to act as a PPAT will play an important role in transactions of land. PPATs can concurrently serve as a notary at the domicile of a notary.  The main task of a PPAT is to carry out land registration activities by making deeds as evidence of the completion of certain legal actions, including: 

 

• the sale and purchase;

• exchanges;

• grants;

• deposits in kind (inbreng);

• the sharing of joint rights;

• the granting of HGB or right to use over freehold title;

• the granting of a mortgage; and/or

• the granting power of attorneys to encumber a mortgage.

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The PPAT will operate within one province region.  In order to execute the abovementioned tasks, the PPAT is authorized to make authentic sales and the purchase of land deeds, encompassing all the legal aspects regarding land titles and the right of ownership over a unit in a multi-story building/hak milik atas satuan rumah susun located within their jurisdiction.  The making of such deeds must be observed by at least 2 (two) witnesses. 

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Land Registration and Encumbrance of Right

 

The transfer of land titles and the right of ownership over units in a multi-story building/hak milik atas satuan rumah susun through the sale and purchase, exchange, grants, deposit in kind (inbreng) and other legal actions of transfer of rights, excluding the transfer of rights through auction, can only be registered if it is proven by deeds. In particular, deeds made by the authorized PPAT according to the provisions of prevailing laws and regulations. 

​

Within 7 (seven) business days from the signing date of the relevant deed, the PPAT is obliged to submit the deed made along with any relevant documents, as well as a written notification to the BPN of registration. 

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Moreover, the PPAT is also obliged to register an encumbrance of right over land such as: a mortgage, the right to use and the right to lease buildings, and any other encumbrances over land titles, or the right of ownership over a unit in a multi-story building/hak milik atas satuan rumah susun.This registration is determined by drafting authorized deeds in accordance with applicable laws and regulations. Such a registration of the encumbrances of rights over land must also be submitted within 7 (seven) business days from the signing date of the relevant deed to BPN, accomplished by attaching any relevant documents and a written notification. 

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Mortgage/Hak Tanggungan

​

A mortgage is the right over collateral imposed upon a land title, along with other objects. It plays an integral part of the transfer of land, along with the settlement of certain debts, which give priority to certain creditors over others.  A mortgage shall be outlined in a mortgage deed drafted by a notary, who is also eligible to act as a PPAT.  The purpose of a mortgage deed is to ensure the settlement of more than 1 (one) debts. If 1 (one) land is encumbered with more than 1 (one) mortgage right, then the rank of each mortgage is determined according to the date of registration at the BPN. In the event that there is more than 1 (one) mortgage registered on the same date, then the rank is determined by the drafting date of the relevant mortgage deed. 

​

A mortgage, and any other relevant documents, shall be registered to the BPN within 7 (seven) business days from the signing date of the mortgage deed by the PPAT.  Moreover, the encumbrance of a mortgage may also be performed by way of providing the power of attorney from relevant party. The power of attorney must be within a notarial deed, and must comply with the following terms: 

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• not provide the authorization of another legal action other than the encumbrances of the mortgage; 

• not mention any substitution right; and

• provide clear information regarding the subject matter of the mortgage, any outstanding amounts, the name and identity of creditor, and the name and identity of debtor in case the debtor is not the grantor of mortgage.

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The power of attorney shall not be revoked or terminated unless the expiration period has passed. The relevant power of attorney must also be followed by the drafting of mortgage deed within 1 (one) month of its provision to the PPAT.  The notary is also responsible for registering the transfer of the mortgage to the BPN due to cessie, subrogation, inheritance, or other reasons that may cause the mortgage to be transferred to a new creditor.  

 

Taxation

 

Taxes are mandatory contributions from individuals or entities to the state, they are utilized to meet state necessity and the people’s welfare.  The government utilizes taxes to provide equal distribution of welfare by providing health insurance, government support, aid, and public facilities procurement. 

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Regarding parties who are obligated to pay taxes, generally any individual (whether Indonesian or foreign) residing in Indonesia and entities incorporated or domiciled in Indonesia are considered as taxpayers, unless the relevant laws and regulations stipulate otherwise. Hence, it can be understood that taxpayers are classified into the subsequent 3 (three) categories:  
 

 

• Individuals

  1. domestic: Indonesian or foreign citizens that are domiciled in Indonesia or reside in Indonesia for more than 183 (one hundred eighty-three) days in a twelve-month period or in a tax year reside in Indonesia and wishes to be domiciled in Indonesia.

  2. overseas: 

     • individuals not residing in Indonesia.

     • foreign citizens residing in Indonesia for no longer than 183 (one hundred eighty-three) days in a twelve-month period;

     • Indonesian citizens residing outside of Indonesia for longer than 183 (one hundred eighty-three) days in a twelve-month period and fulfill the requirements of: i) domicile; ii) center of main activity; iii) location of routine activities; iv) tax subject status; or v) other requirements stipulated by law.

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• Entities

  1. incorporated or domiciled in Indonesia, except certain entities provided by the  government that fulfill the following requirements: i) established based on regulation; ii) capital sourced from State Budget or Regional Budget; iii) income placed into Central Government or Local Government budget; and iv) bookkeeping audited by state functional supervisors.

  2. not incorporated or domiciled in Indonesia which conduct business or activities through permanent establishment/badan usaha tetap in Indonesia; and

  3. not incorporated or domiciled in Indonesia which receive or obtain income from Indonesia, that is not through the permanent establishment of businesses or activities badan usaha tetap in Indonesia.

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• Permanent Establishment

  1. ​Permanent establishment is a business establishment used by: 

     • individuals not residing in Indonesia; 

     • individuals who have not stayed in Indonesia for more than 183 days (one hundred and eighty-three) in any twelve-months period; or 

     • entities not incorporated and domiciled in Indonesia to conduct business or activities in Indonesia.

  2. ​The permanent establishment can be in the form of: 

     • place of management;

     • company branch;

     • representative office; 

     • company building; 

     • factory; 

     • workshop/bengkel; 

     • warehouse; 

     • space for promotion and selling; 

     • mining and exploration of natural resources; 

     • oil and gas mining area;

     • fisheries, livestock, farming, plantation, or forestry;

     • construction projects, installation, and assembly projects/proyek perakitan;

     • services in any form provided by an employee or other individual, as long as it is conducted for more than 60 (sixty) days in a twelve-month period;

     • individual or entity acting as an agent without independent position;

     • agent or employee of insurance company not incorporated and domiciled in Indonesia which accepts insurance premiums or risk cover in Indonesia; and

     • computer/electronic agents, or automatic tools which are owned, rented, or used by electronic transaction organizers to conduct business activities through the internet.
        

 

Tax Identity

 

Subsequently, for the purpose of tax administration and the implementation of a self-assessment system, taxpayers have the obligation to register themselves to KPP, KP4, or through e-registration at www.pajak.go.id to be given a tax identity. Tax identity format is divided into 2 (two) categories, namely, NPWP and NPPKP. 

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NPWP

​

The NPWP is a number issued to a taxpayer as a means of tax administration which is used as a personal or taxpayer identity in the conduction of taxation rights and obligations.  It is necessary for taxpayers to hold a NPWP, otherwise a taxpayer can be subject to a rate 20% (twenty percent) higher than the average tax rate applied to taxpayers who have NPWP.  Additionally, holding a NPWP is one of the SIUO processing requirements.

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NPPKP

​

The NPPKP is a taxpayer identifier which is categorized as a PKP and subject to both VAT and a VAT on luxury goods.  In order to be confirmed as a PKP, local research will be carried out to determine the existence and activities of the business concerned. With the inauguration of an entrepreneur as a PKP, a tax invoice/faktur pajak must be issued upon delivery of taxable goods or taxable services. 

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Tax Collection System

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Generally, there are 3 (three) types of tax collection system, namely: the self-assessment system, official assessment system, and withholding assessment system. Since the amendment of tax laws and regulations in 1983 – known as the Indonesian tax reform, Indonesia has changed its tax collection system from an official assessment system to a self-assessment system.  As of current, the self-assessment system is the most used tax collection system in Indonesia. 

 

Self-Assessment System

 

Through the self-assessment system, taxpayers are required to carry out their tax obligations independently. They must register themselves, calculate their own payable tax, pay taxes to the bank or post office, and report the calculated results and tax payments that have been made to the KPP. Furthermore, the tax collection system is applicable for the imposition of central taxes, such as income tax and VAT which will be explained further in the next section.  

 

Official Assessment System

 

The official assessment system is one of the tax collection systems which enables the tax authority as a tax collector to determine the amount of tax payable by taxpayers.  In this type of tax collection system, the taxpayer is passive as the payable tax is determined and informed by the tax authority. The official assessment system applies to regional taxes, such as land and building tax which will be explained further in the next section.  

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Withholding Assessment System

 

In the withholding assessment system, the amount of payable tax is calculated by third parties who are neither taxpayers nor tax authorities. This type of tax collection system makes tax obligations easier to meet. This is because it is the role of third parties to calculate the tax payable and directly withdraw certain amount of taxes that should be paid by each taxpayer. An example of a withholding system is the deduction of employee income by the treasurer, other parties who are eligible to deduct, or the related agency. Hence, the employees no longer need to fulfill or pay payable tax themselves. Indonesia imposes a withholding assessment system for several types of taxes, including: 

 

• Article 4 (2) Law No. 7/1983 (PPh Final), regarding tax imposed on entity and/or personal taxpayers for several types of income specified in Article 4 (2) Law No. 7/1983, where both income and the withholding tax are final;

• Article 21 Law No. 7/1983 (PPh 21), regarding tax imposed on income in the form of salaries, wages, allowances, and other payments in connection with employment, services, honorarium, and activities conducted by individuals who are resident tax subjects;

• Article 22 Law No. 7/1983 (PPh 22), regarding income tax imposed on certain business entities, both government and private, who carry out export and import activities; 

• Article 23 Law No. 7/1983 (PPh 23), regarding tax imposed on income in the form of dividends, interest, royalties, gifts, bonuses, rent and other incomes in connection with the use of assets, excluded from rent for land and/or buildings, fees in connection with technical, management, construction, consulting services, and other services that have been deducted by Article 21 Law No. 7/1983 (PPh 21). 

• Article 26 Law No. 7/1983 (PPh 26), regarding tax imposed to tax subjects who provide income to foreign tax subjects.  

 

Types of Tax in Indonesia

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In Indonesia, taxes are classified into 2 (two) categories, which are central taxes/pajak pusat and regional taxes/pajak daerah. Central taxes are managed by the central government, particularly by the Directorate General of Taxation under the MoF. Subsequently, the types of taxes which are categorized as central taxes are as follows: 

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• income tax;

• VAT;

• VAT on luxury goods;

• stamp duty;

• land and building tax; and

• acquisition of rights on land and buildings duty.

 

Whereas, regional taxes are taxes managed by the regional governments at both the provincial and regency levels. In this case, regional taxes are handled by the Regional Revenue Agency/Dinas Pendapatan Daerah which is governed under Law No. 1/2022. Regional taxes are further divided into 2 (two), namely provincial taxes and regency/city taxes.  

 

• provincial taxes

  1. motor vehicle taxes;

  2. excise/tax for transfer of ownership of motor vehicles;

  3. heavy equipment tax;

  4. motor vehicle fuel tax; 

  5. surface water tax;

  6. cigarette tax; and

  7. additional tax for non-metals minerals and rocks.

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• regency/city taxes

  1. rural and urban land and building tax;

  2. excise/tax acquiring rights on land and buildings.

  3. goods and services tax;

  4. advertisement tax;

  5. ground water tax;

  6. tax on non-metal minerals and rocks;

  7. tax on swallows’ nest;

  8. additional tax for motor vehicle; and

  9. additional tax for tax transfer of ownership of motor vehicles.

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Income Tax

​

Income Tax/Pajak Penghasilan (PPh) is a tax imposed on an individual or entity on income they earned or received in a tax year.  Subsequently, the object of income tax is any additional economic capacity derived from Indonesia or outside Indonesia that can be used by the taxpayer for consumption or to increase the wealth of the respective taxpayer.  The taxable objects of income tax can be in the form of salaries, bonuses, honorarium, any other compensation for the workers performance, business profits, interests, royalties, and any other incomes stipulated in Law No. 7/1983.  Subsequently, in order to support ease of doing business, the government exempts dividends distributed based on GMS (interim dividends) and dividends originating from within Indonesia received by domestic taxpayers, as the object of income tax.  

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Under Law No. 7/1983, the subject of income tax is distinguished into 2 (two) types, there are domestic tax subjects and foreign tax subjects.  Domestic tax subjects include any individuals who reside, or entities incorporated or domiciled in Indonesia within the period of time specified in Law No. 7/1983.  While foreign tax subjects include any individuals who do not reside in Indonesia, or are entities incorporated or domiciled outside Indonesia.  Furthermore, income tax is imposed on tax subjects who are obliged to pay, withhold, and collect taxes due on tax objects. 

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Value Added Tax (VAT)

 

VAT is a tax imposed on the consumption of taxable goods or taxable services in a customs area. Customs area/daerah pabean refers to the territory of the Republic of Indonesia which includes land, waters, and air space thereon. Individuals, entities, or government who consume taxable goods or services are subject to the imposition of VAT. Generally, all goods and services are categorized as taxable goods or services, unless otherwise stipulated by Law No. 8/1983. The following are the objects of VAT which will be imposed to entrepreneurs who conduct:  

 

• local delivery of taxable goods and/or services;

• import and export of taxable goods;

• consumption of services and/or intangible foods from offshore within domestic customs territory; and 

• export intangible taxable goods and taxable services. 

 

However, the goods and services which are exempted from the obligation of VAT are specified in Article 4A Law No. 8/1983, for instance basic necessities of the community. 

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The producer of goods and/or services, who is the PKP, collect, deposit, and report the VAT. However, the party who is obliged to pay the VAT is the end consumer of the goods and/or services produced by the PKP.  The end consumer will be imposed a single VAT rate at 11% (eleven percent), and in terms of exports, the VAT rate is 0% (zero percent).  

 

Value Added Tax on Luxury Goods

 

Aside from being subject to VAT, purchases of certain taxable goods which are classified as luxury goods are also subject to a VAT on luxury goods/pajak pertambahan nilai atas barang mewah. This tax imposition has the same characteristics as VAT, which is imposed on the end consumer who consumes or utilizes the goods. The objects of taxable luxury goods and their rates are stipulated and regulated in the sectoral regulations regarding VAT on luxury goods, which include: 

 

• goods that are not included as basic necessities; 

• goods that only consumed by certain communities;

• goods that generally consumed by high-income communities; and/or

• goods that are consumed to indicate the status. 

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Furthermore, Article 8 (1) Law No. 8/1983 stipulates a sales tax rate on luxury goods of at least 10% (ten percent) and a maximum of 200% (two hundred percent). 

 

Land and Building Tax

 

Land and building tax are tax imposed on the ownership or utilization of land and/or buildings.  In basic terms, it is categorized as one of the central taxes, however almost all the realization of land and building tax revenue is submitted to the regional government, both provincial and/or regency/city. Subsequently, the objects of land and building tax are: 

 

• environmental roads located within building areas such as hotel, factory and its emplacement, and other buildings that are within the building area;

• toll road;

• swimming pool;

• luxury fence;

• sport venue;

• shipyard and dock;

• luxury garden;

• oil, water and gas storages/refineries, and oil pipelines; and

• other facilities that produce benefits.

 

The subject of land and building tax is a person or entity that has rights over land and/or receives benefits over land, and/or owns, controls and/or receives benefit from a building.  Based on Article 5 Law No. 12/1985, the tax rate imposed on land and buildings is 0.5% (zero point five percent).  Subsequently, land and building tax is imposed based on the sales value of taxable objects/nilai jual objek pajak.  The sales value of taxable objects is the average price obtained from reasonable buying and/or selling transactions, and if there is no such transaction, the sales value of taxable objects will be determined by price comparisons with other similar objects, obtaining new value, or selling value of the replacement tax object.  

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Aside from an obligation to pay land and building tax, ownership through the acquisition of rights over the land and/or buildings also gives rise to BPHTB.  As well as land and building tax, BPHTB is categorized as a central tax, however its realization revenue is submitted to the regional government, both provincial and/or regency/city. 
 

Stamp Duty

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Stamp duty/bea materai is a tax imposed on certain documents.  It is imposed on documents which represent the occurrence of civil relation, and it can be used as valid evidence in court. 
Documents which require stamp duty are specified in Law No. 10/2020, as follows: 

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• letters of agreement;

• certificates;

• letters of statement;

• notarial deeds;

• land deeds made by PPAT;

• securities transaction documents;

• auction documents; 

• documents stating the amount of money with a nominal value more than Rp5.000.000,00 (five million Rupiah) that mentions the receipt of money or contains acknowledgment that the debt in whole or in part has been paid or taken into account; and 

• other documents. 

 

Stamp duty is payable as a fixed amount of Rp10.000,00 (ten thousand Rupiah) for documents as mentioned above.  

 

Taxes Exemptions

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In relation to the ease of doing business in Indonesia, the government provides a facility in a form of tax holiday. Tax holiday is a tax incentive for entrepreneurs. Taxpayers who conduct a new investment in a pioneer industry may obtain reduction or even exemption of income tax for entrepreneurs in a certain term. Provisions on tax holiday are regulated in Law No. 25/2007, tax holidays are provided through exemption or reduction of corporate income tax in a specific amount and period may only be granted to: 

 

• a new investor engaged in a pioneer industry; 

• entities with added value and high externality;

• entities which introduce new technology;

• entities with strategic value for the national economy;

• entities with legal status as an Indonesian legal entity; and

• entities whose debt-to-equity ratio are prescribed by the MoF.

 

In accordance with MoF Reg. No. 130/2020, the tax exemption or reduction facility (tax holiday) applies to these following pioneer industries: