The taxation of land and buildings in Indonesia is bifurcated into two distinct regimes based on the location and use of the property: the Regional Land and Building Tax (PBB-P2) and the National Land and Building Tax (PBB-P3). This dual system is governed primarily by Law No. 1 of 2022 on Financial Relations between the Central Government and Regional Governments (Undang-Undang Hubungan Keuangan antara Pemerintah Pusat dan Pemerintahan Daerah or “UU HKPD”) for regional assets, and Law No. 12 of 1985 as amended by Law No. 12 of 1994 for national assets.

Land and Building Tax (Pajak Bumi dan Bangunan - PBB)

The PBB is an ad valorem tax levied on the ownership, control, or utilization of land and/or buildings. Under the current decentralization framework, PBB is categorized into two sectors:

  1. PBB-P2 (Rural and Urban Sector): Managed by municipal or regency governments (Pemerintah Kabupaten/Kota). It covers residential, commercial, and industrial land and buildings within urban and rural areas.
  2. PBB-P3 (Plantation, Forestry, and Mining Sector): Managed by the Central Government through the Directorate General of Taxes (DGT) under the Ministry of Finance. This includes offshore oil and gas platforms and mining concessions.

According to Article 1 point 33 of Law No. 1 of 2022:

“Pajak Bumi dan Bangunan Perdesaan dan Perkotaan yang selanjutnya disingkat PBB-P2 adalah Pajak atas bumi dan/atau bangunan yang dimiliki, dikuasai, dan/atau dimanfaatkan oleh orang pribadi atau Badan, kecuali kawasan yang digunakan untuk kegiatan usaha perkebunan, perhutanan, dan pertambangan.” (Rural and Urban Land and Building Tax, hereinafter abbreviated as PBB-P2, is a tax on land and/or buildings owned, controlled, and/or utilized by individuals or Entities, except for areas used for plantation, forestry, and mining business activities.)

Tax Object and Subject

The tax object for PBB includes “Bumi” (land and inland waters) and “Bangunan” (permanent structures attached to the land). Under Article 38 of Law No. 1 of 2022, certain objects are exempt from PBB-P2, including those used for public worship, non-profit healthcare, education, national culture, and diplomatic representative offices on a reciprocal basis. The tax subject is the individual or entity that has a right over the land, obtains benefits from it, owns the building, or controls the building.

Tax Base and Calculation (PBB-P2)

The tax base for PBB-P2 is the Tax Object Sale Value (Nilai Jual Objek Pajak or NJOP). The NJOP is determined every three years, except for certain regions where it may be determined annually based on rapid development. The NJOP is established by the regional head (Regent or Mayor) based on market price comparisons, replacement cost, or new acquisition value.

The calculation for PBB-P2 follows this formula: PBB-P2 = Rate × (NJOP - NJOPTKP)

The Non-Taxable Tax Object Sale Value (Nilai Jual Objek Pajak Tidak Kena Pajak or NJOPTKP) is a deduction granted to each taxpayer. According to Article 40 paragraph (4) of Law No. 1 of 2022, the minimum NJOPTKP is set at IDR 10,000,000 per taxpayer.

Rates for PBB-P2

Under Law No. 1 of 2022, Article 41, the maximum rate for PBB-P2 is set at 0.5%. Regional governments have the authority to set specific rates via local regulations (Peraturan Daerah), which may include differentiated rates for agricultural land or productive land to prevent excessive tax burdens on low-income owners.

PBB-P3 (National Sector) Framework

For the PBB-P3 sector, the calculation differs slightly as it incorporates the Taxable Sale Value (Nilai Jual Kena Pajak or NJKP). Under Law No. 12 of 1994, the rate is 0.5% of the NJKP. The NJKP is a percentage of the NJOP, currently regulated by Government Regulation No. 25 of 2002:

  1. 40% of NJOP for plantation, forestry, and mining objects where the NJOP is IDR 1,000,000,000 or more.
  2. 20% of NJOP for other objects.

Acquisition Fee of Land and Building Rights (Bea Perolehan Hak atas Tanah dan Bangunan - BPHTB)

BPHTB is a tax imposed on the legal acquisition of rights to land and/or buildings. Historically a central tax under Law No. 21 of 1997, it was transferred to regional governments under Law No. 28 of 2009 and is currently maintained as a regional tax under Law No. 1 of 2022.

Article 1 point 35 of Law No. 1 of 2022 defines it as:

“Bea Perolehan Hak atas Tanah dan Bangunan yang selanjutnya disingkat BPHTB adalah Pajak atas perolehan hak atas tanah dan/atau bangunan.” (Acquisition Fee of Land and Building Rights, hereinafter abbreviated as BPHTB, is a tax on the acquisition of rights to land and/or buildings.)

The “acquisition of rights” occurs through several legal events or actions, as specified in Article 44 paragraph (2) of Law No. 1 of 2022:

  1. Transfer of Rights: Sale and purchase, exchange, grant, testamentary grant, inheritance, contribution to a corporation (inbreng), separation of rights, court auction, or merger/consolidation of businesses.
  2. Granting of New Rights: Extension of state land rights or conversion of existing rights.

The types of land rights subject to BPHTB include Right of Ownership (Hak Milik), Right to Build (Hak Guna Bangunan or HGB), Right to Use (Hak Pakai), Right of Cultivation (Hak Guna Usaha or HGU), and Right of Management (Hak Pengelolaan).

Tax Base (NPOP)

The tax base for BPHTB is the Tax Object Acquisition Value (Nilai Perolehan Objek Pajak or NPOP). The determination of NPOP depends on the method of acquisition:

  1. Sale and Purchase: The transaction price.
  2. Exchange/Grant/Inheritance: The market value.
  3. Auction: The price stated in the Auction Minutes (Risalah Lelang).

If the NPOP is lower than the NJOP used for PBB in the year of acquisition, the NJOP is used as the tax base.

Calculation and Thresholds

The BPHTB is calculated by applying the rate to the NPOP after deducting the Non-Taxable Tax Object Acquisition Value (Nilai Perolehan Objek Pajak Tidak Kena Pajak or NPOPTKP).

BPHTB = Rate × (NPOP - NPOPTKP)

Statutory limits for BPHTB under Law No. 1 of 2022 are:

  1. Maximum Rate: 5% (Article 47).
  2. Standard NPOPTKP: Minimum IDR 80,000,000 for the first acquisition by a taxpayer (Article 46 paragraph (1)).
  3. Inheritance NPOPTKP: Minimum IDR 300,000,000 for acquisitions through inheritance or testamentary grant received by heirs in a direct lineage (Article 46 paragraph (2)).

Procedural Requirements for Companies

For corporate entities, the payment of BPHTB is a prerequisite for the registration of land rights at the National Land Agency (Badan Pertanahan Nasional or BPN). Under Government Regulation No. 18 of 2021, a Land Deed Official (Pejabat Pembuat Akta Tanah or PPAT) is prohibited from signing a deed of transfer until the taxpayer provides proof of BPHTB payment (the Surat Setoran Pajak Daerah or SSPD). Failure to comply can result in administrative sanctions for the PPAT and the invalidity of the registration process.

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