If you’re renting property in Indonesia, whether as a tenant or a property owner, it’s essential to understand the tax obligations involved. The Indonesian government imposes rental taxes on property leases, and non-compliance can lead to penalties.
This article breaks down the rental tax system in Indonesia, making it easy to understand and ensuring you stay compliant.
Also read: Can Foreigners Buy Property in Indonesia? (2025 Update)
What is the Rental Tax in Indonesia?
Rental tax in Indonesia applies to the income generated from leasing land and buildings.
This tax is made up of two primary elements:
- Final Income Tax (PPh Pasal 4 Ayat 2) – 10%
This is a final withholding tax imposed on rental income. The tenant is responsible for withholding this tax and remitting it to the government. However, if the tenant is an individual who is not required to withhold taxes, the property owner must self-report and pay the tax. - Value-Added Tax (PPN) – 11%
If the property owner is a taxable entrepreneur (Pengusaha Kena Pajak or PKP), they must collect and report Value-Added Tax (PPN) at a rate of 11% on rental transactions. This means tenants renting from a PKP must pay an additional 11% on top of the agreed rental fee.
Also read: VAT-Registered Business in Indonesia (PKP): A Complete Guide
Who is Responsible for Paying Rental Tax?
- For tenants (businesses or organizations): Tenants must withhold 10% of the rental payment as Final Income Tax (PPh 4(2)), deposit it to the tax office, and provide proof of tax payment to the property owner.
- For tenants (individuals): If the tenant is an individual who does not conduct business activities, the responsibility to pay PPh 4(2) falls on the property owner.
- For property owners: If registered as a PKP, the owner must collect 11% PPN from the tenant, submit it to the tax office, and issue a tax invoice.
Also read: Tax Refund in Indonesia for Tourists and Businesses: A Complete Guide
Key Regulations on Rental Tax
Several laws govern rental tax in Indonesia, including:
- Income Tax Law (UU No. 36 Tahun 2008) – Regulates PPh Pasal 4 Ayat 2.
- Value-Added Tax Law (UU No. 42 Tahun 2009) – Regulates PPN on rental income.
- Government Regulation (PP No. 34 Tahun 2017) – Details implementation rules for rental income tax.
How to Report and Pay Rental Tax in Indonesia
Using e-Billing for Tax Payment
To pay rental tax, taxpayers must generate a billing code through the government’s e-Billing system. Payments must be made before the deadline:
- PPh 4(2): By the 10th of the following month.
- PPN: By the end of the following month.
Reporting PPh Pasal 4(2) and PPN
- Tenants report PPh Pasal 4(2) using e-Bupot Unifikasi: This online system enables businesses to generate and submit withholding tax receipts.
- Property owners report PPN using e-Faktur: If they are classified as PKP, they must issue tax invoices and submit reports online.
Also read: Indonesia’s PPN Guide: 2025 Regulation, Rates, Calculation
Example Calculation of Rental Tax
Let’s say a company rents an office building for IDR 500 million per year. Here’s how the tax works:
- PPh 4(2) (10%): IDR 50 million is withheld by the tenant and paid to the tax office.
- PPN (11%): If the property owner is a PKP, the tenant pays an additional IDR 55 million, which the owner submits to the tax office.
Understanding rental tax obligations in Indonesia helps both tenants and property owners avoid legal issues and stay compliant with tax laws. Whether you’re a business or an individual, staying informed about PPh Pasal 4 Ayat 2, PPN, and tax reporting procedures ensures smooth transactions and prevents unnecessary penalties.
If you need further assistance, you can rely to InvestinAsia’s Indonesia tax consultant and compliance services.
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- Accounting and tax reporting services in Indonesia
- Indonesia Payroll Service
- Indonesia LKPM Reporting Service
- Indonesia VAT Taxpayers Registration
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Common Questions About Rental Tax in Indonesia
Do individual tenants need to withhold rental tax?
No, individual tenants are not required to withhold PPh 4(2). Instead, the property owner must self-report and pay the tax.
What happens if a tenant or property owner fails to comply?
Non-compliance can result in penalties and fines, including late payment interest and administrative sanctions.
Can rental tax be deducted as a business expense?
Yes, businesses can usually deduct rental expenses, including the rental tax, as part of their operational costs.
How do I check if my landlord is a PKP?
You can check through the Directorate General of Taxes (DJP) website or ask the landlord directly for their tax identification.
reference: Directorate General of Taxes
