Exciting news is on the horizon for Indonesia’s middle class. The Indonesian government has introduced a significant tax relief measure, offering a 100% exemption on Value Added Tax (VAT) for property purchases, including home, through the end of 2024. This bold move aims to stimulate economic growth and boost consumer spending among the middle class.
Under this new policy, the government will cover the full VAT cost for property transactions, with a tax base (DPP) cap of IDR 2 billion and house prices up to IDR 5 billion. This initiative is detailed in the Ministry of Finance Regulation No. 120 of 2023, which addresses VAT on the transfer of land, buildings, and flats, and is set for the 2023 fiscal year.
According to Article 7 of the regulation, the VAT exemption is implemented in two phases. For transactions occurring between November 1, 2023, and June 30, 2024, the government will cover 100% of the VAT. For transactions from July 1, 2024, to December 31, 2024, the exemption will be reduced to 50%. However, recent decisions ensure that the 100% VAT relief will continue through the end of 2024.
Febrio Kacaribu, Head of the Fiscal Policy Agency at the Ministry of Finance, emphasized the importance of this policy during a session at the DPR building in Jakarta on August 27, 2024. “Our aim is to sustain economic growth momentum. We see a significant need for this support in the housing sector, especially for the middle class,” Kacaribu stated.
This VAT exemption can be claimed only once per individual identification number (NIK) or taxpayer identification number (NPWP). The policy applies solely to new landed houses or new flats that have received a housing identity code from the Ministry of Public Works and Public Housing (PUPR) or the People’s Housing Savings Management Agency (BP Tapera).
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“Housing not only involves the consumption sector but also provides a considerable multiplier effect on economic growth,” Kacaribu added.
In addition, the government plans to increase the Housing Financing Liquidity Facility (FLPP) recipients from 166,000 to 200,000 units starting September 1, 2024. This initiative aims to support home purchases for low-income individuals.
“We recognize that low-income individuals are part of the middle class. Therefore, we are providing robust support for the housing sector, including the 100% VAT exemption for commercial homes and enhancing the FLPP program to 200,000 units,” Kacaribu concluded.
This strategic move by the Indonesian government in a 100% exemption on VAT for home promises to not only stimulate the housing market but also bolster economic growth and consumer confidence across the nation.
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