government has removed double taxation on real estate securities in trust in order to attract more investors in the local land play.
The Indonesian government launched an interesting economic policy program in October 2015. But not many realize the importance. The package removed double taxation for any investor putting money into a Real Estate Investment Trust (REIT) through the mutual agreement of the system (CIC).
For those who are less experienced with the jargon property REIT is a term used to describe a company that owns, and in most cases, operates income-producing real estate. REITs can be publicly traded on the major exchanges. Investors receive special tax considerations and typically yields high dividends. Similar to how sponsors are treated to a venture capital company, the CIC system allows investors pool funds into a "collective investment scheme" (CIV) rather than investing directly in real estate projects individually.
Previously, the government taxed twice for the investors to invest in property in this way. Before the packet was transmitted, the method was painful in Indonesia because donors were forced to hand over money to the tax on their dividends, but also on their activities, as the VIC was considered a person morality itself.
This is the case, however, the government decided to simply apply a single tax for investors who go through collective investment vehicles. Following the announcement, the Minister of Finance Bambang Brodjonegoro said the government considered the collective investment contract and collective investment vehicles are now one entity. At present, a singular tax rule should allow the REIT market to better prosper in Jakarta and hopefully attract new investors.
The REIT market should attract new investors | Photo courtesy BxHxTxCx
"There will be no taxes on dividends paid by the SPV to CIC investors," said Brodjonegoro during 'a press conference. "If an underlying asset sale occurs through the special purpose vehicle, no tax will be charged either."
Executive Director of real estate consulting firm based in Jakarta, Indonesia Property Watch, Ali Tranghanda appreciate the package, that trade in FPI is already common in countries such as Singapore, Japan and Malaysia.
"REIT is an important tool to collect cheap money in the stock market in many countries. Indonesia 'Ciptadana "as one of its real estate investment trusts, but security was overwhelmed by the double taxation until recently," said Tranghanda Indonesia Expat .
in Indonesia, the securities of the REIT have so far only reached Rp.500 billion ($ 37.65 million US) in value. this is much less than in Malaysia, where they reached US $ 7.53 . Singapore recently clocked billion of REIT securities at approximately US $ 45 billion Indonesia, according Tranghanda, will soon catch up. - or even exceed -. Malaysia in terms of size of the property market, probably because of more activity on the FPI
market"REIT is a kind of investment in real estate, but it will not necessarily increase the price of the property. the new policy on the REIT may even reduce the mortgage interest of 12 to 8 percent or 9 percent. This will definitely give more benefits to developers and customers, "said Tranghanda.
Big developers are excited too. Following the announcement, the real estate giant Lippo Group plans to take advantage of the policy. Currently, Lippo two real estate investment trusts, and worth about 2.57 billion US $ to the Singapore Exchange. The conglomerate plans to soon put on the Indonesia Stock Exchange. CEO James Riady made no secret of the company say taking this step to benefit from local tax incentives, in particular the recent elimination of the double taxation of REITs.
"If we do not develop REIT, financing future building projects will be difficult. These developments are very important decisions. We expect Lippo can manage real estate investment trusts, which can be worth more Rp.100 billion (US $ 7.53 billion) within three to four years ", said recently Riady the Jakarta Post .
Outside of Lippo, a mysterious conglomerate Saudi Arabia will invest in the sectors of real estate and the Indonesian industry. In early March, Head of Investment Coordinating Board Franky Sibarani said the firm was the fifth largest company in Saudi Arabia, and was scheduled to visit sometime in March to discuss the investment plan .
"Indonesia is one of its primary target countries for investment. The possibility is very real and they are very committed. If all goes well, this could be a golden opportunity to get more Middle Eastern investors to put their money in Indonesia, "Sibarani said in a statement. While the company name remains off the record, Sibarani says the owner of the company is one of the richest men in Saudi Arabia, with a wealth of US $ 1.4 billion.
Tranghanda is also optimistic about the prospects of the property Indonesia sector through favorable economic packages and recent developments of the infrastructure.
"Indonesia property Watch has calculated a 16.6 percent growth in the local real estate sector during the last quarter 2015. We expect in the second half of this year, that growth will continue, "he said." But the government must reduce the cost of acquiring land and buildings 1 percent [of their overall value]. It should also provide tax for properties to 0.5 percent by the end of the first half to attract more investors. At least five major real estate companies in Indonesia are ready to jump into the trade REIT. "
Meanwhile, President Joko Widodo has signed a government regulation in December 2015, which allows foreigners holding residence permits to buy certain types of housing on a basic" right of use " . expats can buy homes on land owned or freehold for a duration of 80 years. If the expatriate owner pass, the house can be inherited by heirs who also hold residence permits Indonesia survivor.
However, it is important to note that without the right to own the land on which the house sits, foreigners should really think twice about buying a house in Indonesia . According to the rules, you are not really buying anything, but simply to rent a house for 80 years. future generations of your family may have problems later. in addition, if the government decides that it has other plans for this piece of land in particular, a foreign owner would surely wind up in a weaker bargaining position.
"It's usually not because of foreign ownership rules that foreigners come to Indonesia in the first place," clarifies Tranghanda. "Even without the law, they continue to come here anyway because they often have business in the country. The law simply gives the expatriates' right to use the property, not the "right to possess. "
The new law aims to provide greater legal certainty for foreigners who own homes. But still, foreigners overseas would be unable to purchase property as an investment, that regulation specifically requires them to live in Indonesia and local business interests. Indeed, making trading REITs a much more attractive for expatriates to buy in-game property of Indonesia abroad.