The Indonesian government has introduced new legislation to support the housing industry, which has been damaged due to the COVID-19 pandemic (the Regulations).* The Regulations provide VAT discounts on housing sale prices, which, prior to the Regulations were 10%. Prior to the COVID-19 pandemic, the housing industry’s contribution to GDP was increasing year on year, from 7.8% in 2000 to 13.6% just prior to the effects of COVID-19. When the pandemic hit Indonesia, that contribution dropped dramatically to -2%. Many other industries that support housing also felt the effects of the pandemic. Consequently, the new Regulations also provide various forms of relief to many of those industries.

The Regulations set out two schemes for VAT relief. First, VAT will not be charged at all on the sale of any property with a price of up to IDR 2 billion (just under US$140,000). Second, the Regulations provide a 50% VAT discount on the sale of properties priced between IDR 2 billion to IDR 5 billion (just under US$350,000). This VAT relief is available on all properties for which the documentation is completed between March and August 2021. These incentives only apply to new properties that have not been previously owned and the purchase limit is one per person. The Regulations provide that the ownership of any property that has been the subject of a VAT discount may not be transferred less than one year after the sale.

VAT discounts will also be granted to buyers who have this year already paid a deposit or instalment on a property this year. The VAT discount will only apply to the sum paid to finalise the sale between March and August 2021.

*Regulation Number 21/PMK.010/2021