The Indonesian government is making strides to boost the housing sector by offering substantial tax incentives for house buyers. For houses priced under IDR 2 billion, the government will cover 100% of the Value-Added Tax (VAT) until June 2024. Post-June, the VAT coverage will be reduced to 50%.
“The VAT covered by the government for homes priced below IDR 2 billion will be 100% until the end of June next year,” clarified Airlangga Hartarto, the Coordinating Minister for Economic Affairs, in an official statement on Monday, May 20, 2024. “After June, the government will cover 50% of the VAT.”
The decision is a response to the recent downturn in the housing sector, with the GDP in this sector decreasing by 0.67% and the construction sector by 2.7%. Notably, the housing and construction sectors contribute significantly to the economy, accounting for 14-16% of the GDP, employing around 13.8 million people, and contributing 9.3% in taxes and 31.9% to regional revenue.
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Dwi Astuti, Director of Dissemination, Services, and Public Relations at the Directorate General of Taxes (DDJP) of the Ministry of Finance, explained the specifics of the VAT incentive. She noted that the VAT incentive applies to the Taxable Base (DPP) of up to IDR 2 billion for homes priced up to IDR 5 billion.
“For example, if Mr. A buys a house for IDR 6 billion, he won’t benefit from the VAT incentive as the price exceeds IDR 5 billion. Conversely, if Mr. B buys a house for IDR 5 billion, he will receive the VAT incentive but only for the DPP up to IDR 2 billion. This means the VAT covered by the government would be 11% of IDR 2 billion, or IDR 220 million,” Dwi explained in a recent statement.
According to Article 7 of the relevant Ministerial Regulation (PMK), the VAT incentive is divided into two periods. For homes delivered between November 1, 2023, and June 30, 2024, the government will cover 100% of the VAT on the DPP. For homes delivered from July 1, 2024, to December 31, 2024, the government will cover 50% of the VAT on the DPP. This policy is available only once per National Identity Number (NIK) or Taxpayer Identification Number (NPWP).
The government hopes this initiative will not only make housing more affordable but also stimulate economic activity within the housing and construction sectors, supporting both jobs and regional economies.
