Govt cuts taxes on REIT's

March 30, 2016, 03.25 PM | Source: The Jakarta Post
Govt cuts taxes on REIT's


JAKARTA. The government is cutting the tax on real estate investment trusts (REITs) to boost local use of the financial mechanism that employs commercial properties like malls, hospitals, warehouses, hotels and office buildings as underlying assets.

Indonesia only had two REITs created in the country in the past nine years, namely Lippo Malls Indonesia Retail Trust (created in November 2007) and DIRE Ciptadana Properti Ritel Indonesia (created in November 2012).

"Some local businessmen have created REITs in neighboring countries, but we saw only one REIT created in Indonesia after 2012. The higher tax compared to in neighboring countries is the main problem," said Coordinating Economic Minister Darmin Nasution in Jakarta on Tuesday.

The government, he explained, issued the 2015 Finance Ministry Regulation to remove a double taxation in REITs. However, the tax is still much higher than that in neighboring countries especially amid economic slowdown and the Rupiah weakening.

The government tried to address the issue in its fifth economic stimulus package by cutting a multiple tax previously imposed on REITs and it further cut the tax from 5% to only 0,5% in its newly released 11th package.

The government also plans to issue a regulation to cut the land and building acquisition taxes (BPHTB) from 5% to 1%. "There will be several regulations issued by local governments that aim to utilize REITs in their region," Darmin said.

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