Indonesia plans to cut taxes on luxury properties and revise other tax rules in a bid to support the real estate industry and attract investment in Southeast Asia’s biggest economy, Finance Minister Sri Mulyani Indrawati said.

 The threshold for a luxury tax of 20 percent applied to houses and apartments would be raised to at least Rp30 billion (US$2.06 million) from Rp20 billion, she said in comments published on the cabinet secretary’s website late on Wednesday.  Sales of luxury property will also be subject to a lower tax of 1 percent of the selling price, against 5 percent now.  “We hope the business side of the construction sector will be boosted,” Indrawati said. She did not give a timetable and said the regulations were currently being formulated.    Read more about the fastest growing real estate market in Indonesia    Indonesian policy makers have been keen to kickstart the country’s sluggish property sector in a bid to help lift an economic growth rate that has been stubbornly stuck at around 5 percent in recent years.  Indrawati said the government, beside changes on the property tax in Indonesia is also considering other tax incentives to boost exports, such as removing value-added tax (VAT) on some service exports, including accounting and legal, and cutting tax rates on time deposits for exporters.

 A corporate taxpayer (limited liability company) investing in certain approved industry sectors (high priority economic sectors on a national scale as stipulated by government regulation) and/or geographical areas (with high economic potential to be developed) may be entitled to income tax benefits in the form of:

 
•  An additional reduction in net income, up to 30% of the amount invested in tangible fixed assets (including land), charged at 5% per annum over six years;
 
•  Accelerated depreciation and amortization;
 
•  Extension of tax loss carryforwards for up to 10 years (and beyond, if certain requirements aremet); and
 
•  A reduced 10% withholding tax rate on dividends paid to nonresidents (which may be further reduced under a tax treaty).To apply for the corporate tax benefits, certain detailed requirements must be met including qualitative criteria, such as high investment value or export-oriented, high labor absorption and high local content. The industry sectors that are eligible include food, textiles, chemicals and chemical products, plantations, forestry and logging, coal and lignite mining, oil, natural gas and geothermal mining.