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VAT incentives to boost Indonesia’s housing sector

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VAT incentives for the housing sector in response to COVID-19

Benjamin Simatupang, Fabian Abi Cakra and Siti Ni'mah Fitriah of GNV Consulting Services discuss VAT incentives that have been introduced to support Indonesia’s housing sector.

Indonesia’s Minister of Finance (MoF) issued a new Regulation No. 21/PMK.010/2021 (PMK-21) regarding the VAT incentives for the housing sector, which came into effect on March 1 2021, in response to COVID-19.

Under PMK-21, the VAT payable on the delivery of landed houses or flat units between March and August 2021 will be borne by the government. Delivery is considered to occur in the following situations:

  • The signing of the notarised sale purchase agreement; or

  • The issuance of payment certificate by the seller,

and the transfer of right, which shall be proven by the affidavit of transfer. 

To obtain the incentive, the transaction object should be a new and ready-to-use landed house or flat unit, with a selling price of not more than IDR 5 billion (approximately $344,250). Further, the VAT incentive will be given depending on the selling price of the unit, as shown below.


Unit selling price


Up to a maximum of IDR 2 billion


Between IDR 2 billion and IDR 5 billion

Please note that certain requirements and administrative procedures regarding the VAT invoice issuance and the realisation report should be fulfilled; otherwise, the VAT incentive may not be implemented. Delivery of a landed house or flat unit that is subject to VAT exemption facilities may also not enjoy the facility under this regulation.

Motor vehicle industry

In line with the spirit of the above VAT incentive, on March 31 2021, the MoF also stipulated a new Regulation No.31/PMK.010/2021 (PMK-31) to support the motor vehicle industry during the COVID-19 pandemic. Through PMK-31, the luxury goods sales tax (LGST) payable on the delivery of certain motor vehicles will be borne by the government. 

The applicable percentage and period of the LGST incentive varies depending on the type of the vehicle and its cylinder capacity, as shown below.


Vehicles with ignition or compression ignition engines (diesel or semi-diesel)

Cylinder  capacity

LGST and the applicable tax period


Sedan or station wagon

≤ 1500 cc


        100% for April to May 2021

        50% for June to August 2021

        25% for September to December 2021


Vehicle for the transportation of less than 10 people including driver other than sedan or station wagon with a one-drive wheel (4x2) system


Vehicle for the transportation of less than 10 people including driver other than sedan or station wagon with a one-drive wheel (4x2) system

> 1500 – 2500 cc

        50% for April to August 2021

        25% for September to December 2021


Vehicle for the transportation of less than 10 people including driver other than sedan or station wagon with a two-drive wheel (4x4) system

> 1500 – 2500 cc

        25% for April to August 2021

   12.5% for September to December 2021

However, please note that to implement these LGST incentives, the motor vehicle as intended above must meet the requirements of local purchase set by the Ministry of Industry, including the fulfillment of local content of at least 60%. 

Similarly, please be aware that certain requirements and administrative procedures regarding the VAT invoice issuance and the realisation report should be fulfilled; otherwise, the LGST incentive may not be implemented. 

PMK-31 also prescribes the format of a motor vehicle list which is part of the realisation report. The realisation report is submitted through a specific platform on the tax authority website.

VAT credit of land acquisition

On March 19 2021, the Director General of Taxation (DGT) issued a circular letter No. SE-28/PJ/2021 (SE-28) for uniformity of the VAT treatment in relation to transfer of land and its VAT credit. Salient confirmations made by SE-28 are as follows: 

  • Generally, VAT is payable on transfer of land that was used for business conducted by a VATable entrepreneur. However, transfer of land to another VATable entrepreneur which is undertaken as a result of corporate actions (such as mergers, spin-offs, business takeover and so forth) or for capital participation purposes is not VATable;

  • For a VATable entrepreneur that engages in land/building transfers business, the VAT payable on the transfer of land should be administered in the tax office where the land is located. However, for a VATable entrepreneur that is registered in a large taxpayer office, the Jakarta Special Tax Office, or a Middle/Madya Tax Office (collectively called KPP BKM), and the land is located within the working area of such tax office, the VAT administration will take place there;

  • Land transfer made by a VATable entrepreneur to a government institution in the context of land acquisition is subject to VAT with a transaction code of 01. Such VAT is not being collected by the government;

  • The treatment of input VAT credit arising from acquisition of land for a VATable entrepreneur that is still in pre-production stage will be as follows:

    • Before the enactment of Law No. 11 of 2020 concerning Job Creation (Omnibus Law), the land may be considered as Capital Goods and the input VAT related to it may also be credited although the land is not depreciable; and

    • After the enactment of the Omnibus Law, input VAT from land acquisition, either as capital goods or non-capital goods, is creditable.

SE-28 also provides case studies on how the VAT treatment and administration should work. However, please bear in mind that the general VAT administration requirements and the timeframe of pre-production stage set by the VAT Law shall prevail in crediting the input VAT from land acquisition.

Benjamin Simatupang

Partner, GNV Consulting Services



Fabian Abi Cakra

Director, GNV Consulting Services



Siti Ni'mah Fitriah

Manager, GNV Consulting Services





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