Real Estate Indonesia: Open up Property Sector to Foreign Ownership
Real Estate Indonesia (REI) advises the Indonesian government to open up the country's property sector to foreign ownership as this is considered to benefit the Indonesian economy through the collection of taxes and foreign exchange earnings. According to Teguh Kinarto, vice-chairman of the REI's Central Board, the state can gain a lot of revenues through taxes, such as the property tax of 10%, luxury tax of 20%, as well as various other taxes. Currently, foreigners can only buy the right to use property in Indonesia, not the right to own.
Kinarto said that if foreign investors or foreign tourists can buy property in Indonesia, it will stimulate economic activity around their places of residence. Indonesia prohibits (direct) foreign ownership of property as the country is concerned about foreign domination in the sector. However, in order to avert this alleged foreign domination, Kinarto says that the government can impose certain restrictions. For example by introducing a quota to property that is available for foreigners (such as 20 percent of the total number of apartments in an apartment complex) or by limiting foreign ownership to a specific region or price.
Currently, foreigners lease or buy the right to use property in Indonesia when wanting to use property. An often used structure is also through a joint venture with a local company or by putting property on the name of an Indonesian citizen. However, these structures obviously imply risks for the foreigner.
Taxes that are involved in the purchase of property in Indonesia are value added tax (10 percent), income tax (5 percent), tax on the acquisition of land and building (5 percent), and value-added tax on luxury goods (20 percent).