Indonesia and Jakarta in particular is in the grip of a construction boom with condominiums, offices, malls and mixed-use complexes springing up all over the city and its environs. An astounding 83.3 per cent of Indonesia’s gross fixed capital formation last year was spent on buildings. At the moment, Jakarta property development in is centered around the middle end of the market, and regionally, in west Jakarta and the fringe of the CBD. Unit prices in Jakarta average US$1,552 per sqm, which compares well with other popular city locations in the region. Many overseas buyers opt for the buy-to-let option, largely due to the fact that although yields on apartments in Jakarta average an excellent 9.9 per cent, despite recent drops driven largely by apartment price increases outstripping rental rates rises.
Rental returns also compare well with other parts of Indonesia; Bali villas for example, have a gross rental return of around 4.57 per cent. However, rental income tax is also comparatively high in Indonesia. Non-Indonesians, including those who are non-resident, are subject to tax on their Indonesian-sourced income. Those with a monthly income from rental returns are generally subjected to a tax of 20 per cent and all expenses related to property rental are non-deductible. Transfers of Indonesian properties are also subject to tax. Capital gains tax is levied at a flat rate of 20 per cent of the gross sale value of the property or the assessed value for property tax purposes, whichever is higher.
Local companies owned by non-resident individuals, a popular means of buying property among non-Indonesians, are taxed on gross Indonesian-source income at a flat rate of 20 per cent. Such companies are also subject to capital gains tax at a flat rate of 20 per cent of the gross sale value of the property when they transfer units.