Rent from a house, shophouse (ruko) or warehouse is income, and that income is taxed. Many owners only realise this when a corporate tenant hands them a withholding slip, or when they sit down to fill in their annual tax return (SPT Tahunan).
The rules are not complicated. There is one rate, a clear base, and you only need to remember who pays and by when.
This guide is for individual owners renting out a house, shophouse or other building. It covers how to calculate the tax, how to pay it, worked examples and the records to keep.
The rate is 10 percent of gross rent
Income from renting out land and/or buildings is subject to a final income tax (PPh final) of 10 percent of the gross rent. The rule is Government Regulation (PP) No. 34 of 2017. It covers houses, shophouses, warehouses and kiosks, and vacant land rented out as well.
Gross means the rent before any costs are deducted. The Pajak Bumi dan Bangunan (PBB, the annual land and building tax), repairs, agent’s commission and bank instalments don’t reduce the tax base.
Final means the tax ends there. The rental income isn’t added to your other income and taxed again at progressive rates. You only report it in the annual return.
If the tenant also pays you other charges linked to the lease, such as a service fee, ask the tax office whether they count.
Who pays: the tenant or you
There are two possibilities, depending on who the tenant is.
- A business tenant appointed as a tax withholder. The tenant deducts 10 percent when paying, deposits it with the tax office and gives you a withholding slip (bukti potong). You receive 90 percent of the rent.
- An individual tenant, or anyone who isn’t a withholder. You receive the full rent and pay the 10 percent PPh yourself.
With a corporate tenant, state in the lease whether the agreed rent includes the PPh or not. The difference is 10 percent, and misunderstandings about it often only surface at the first payment.
Corporate tenants usually ask for your tax identity details before paying, because they go on the withholding slip. Have them ready early so the payment isn’t held up.
Check every withholding slip you receive, too. Your name and tax identity number must be correct, because the slip is what you rely on when you report. If the amount on the slip differs from what was actually deducted, ask the tenant to correct it.
When to pay and report
If you pay the tax yourself, the deadline is generally the 15th of the month after the rent is received. A year’s rent received in one go in March, for example, generally has its tax due by 15 April.
If rent comes in instalments, say twice a year, the tax follows each payment. Every time money arrives, pay 10 percent of it by the 15th of the following month.
Tax payments and reporting now run through Coretax, the system of the Direktorat Jenderal Pajak (DJP, the tax directorate). There you create a billing code, pay through one of the available channels and keep the payment receipt. The screens and steps can change, so follow the guidance inside Coretax.
When you create the billing code, choose the tax type for final PPh on renting land and/or buildings, and enter the tax period as the month the rent was received. If you’re unsure, staff at the Kantor Pelayanan Pajak (KPP, the tax office where you are registered) can help.
Late payment or late reporting can attract administrative penalties. If you realise rent from a past year was never taxed, ask the KPP how to put it right. The sooner it’s sorted, the simpler it is.
Each year, report the rental income and the final PPh paid or withheld in your annual return, in the section for income subject to final tax. The rented property also goes on your list of assets.
Worked examples
Worked example (illustrative numbers only):
- A house with an individual tenant. Rent of Rp 36 million a year, paid in one go in March. The 10 percent PPh is Rp 3.6 million, paid by you, generally by 15 April.
- A shophouse with a corporate tenant that withholds tax. Rent of Rp 120 million a year. The company withholds Rp 12 million, transfers Rp 108 million to you and gives you a withholding slip. You pay nothing more and only report it.
- A monthly row-house rental. Rent of Rp 1.5 million a month from an individual tenant. The final PPh is Rp 150 thousand each month, due by the 15th of the following month.
Note that the tax is calculated on the rent received, not on profit. A house with high upkeep costs still pays 10 percent of its rent.
That is why this tax belongs in your numbers from the moment you set the rent. How to do that is in our guide to setting a fair rent.
A habit that helps: as soon as rent arrives, move 10 percent of it to a separate account. The money is still there when the deadline comes.
Records to keep
Keep these documents for each property, for years:
- Leases, including renewals and rent changes.
- Proof of rent received, such as bank statements or receipts.
- Billing codes and payment receipts for every final PPh payment.
- Withholding slips from corporate tenants.
- PBB bills and receipts, filed separately from the PPh papers.
- Receipts for major spending such as renovations. They don’t reduce the tax, but you need them to work out your own return on the property.
A simple record for each property helps a great deal. List the tenant’s name, the rental period, the amount, the date the money arrived and the date the tax was paid. One spreadsheet is enough, as long as you keep it up to date.
If the tax office asks a question years later, this record saves you from guessing.
PBB and cases to ask about
PBB is a regional tax billed every year to the owner. It has nothing to do with the tax on rent, and paying PBB doesn’t reduce your final PPh.
Taxes on buying and selling property are a separate matter as well. The buyer pays the Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB, the acquisition duty), and the seller pays a final PPh of 2.5 percent of the sale value.
If you rent out rooms, such as a boarding house (kos), also ask the local revenue office whether a regional tax applies.
Some situations are worth taking straight to your KPP or to a tax consultant:
- Jointly owned property, for example owned by several heirs or by a married couple.
- Rent paid upfront for several years at once.
- A corporate tenant that doesn’t issue withholding slips.
- A building you partly live in and partly rent out.
A broader guide for landlords is in renting out your house safely, and the investment numbers are in buying property to rent out.
Next steps
- List every property you rent out, who the tenant is, and whether that tenant is a tax withholder.
- For individual tenants, note the date rent is received and mark the deadline on the 15th of the following month.
- For corporate tenants, ask for a withholding slip with every payment.
- Report everything in your annual return and keep the file.
- If tax on past rent was missed, talk to the KPP.
If you have a question about a property you want to rent out or sell, you can reach Vorneo on WhatsApp.
