Taking force at the end of this month, Minister of Finance Regulation No. 39/PMK.03/2010 on the Limitations and Procedures of Value Added Tax Imposition on Private Construction Activities will do one thing: apply value-added tax (VAT) on private construction activities that meet certain criteria, which the regulation sets out.
Buildings that meet all of these criteria will be subject to VAT: (1) are mainly made of wood, concrete, bricks, and/or steel; (2) destined for residency or business purposes, and; (3) command an area equal to or greater than 300 square meters. Although construction performed in stages is considered ‘one activity’ for tax purposes, the gaps between stages of construction may not exceed two years for that condition to be applicable.
The formula that will be used to calculate the VAT is:
10% x (40% of monthly construction expenses, not including land prices)
The tax must be paid every month to the State Treasury by way of a post office or reception bank. A report of the payment must be submitted to the closest Tax Office to the building, using the third page of a Tax Payment Form (Surat Setoran Pajak, also known as SSP3).
Clarified instructions for how to precisely fill out the Tax Payment Form, along with the practical side of how private construction VAT payment processes will be supervised, will be regulated in a subsequent Director General of Tax Regulation.
This regulation repeals and replaces Minister of Finance Decision No. 554/KMK.04/2000 on the Limitations and Procedures of [VAT] Imposition on Private Construction Activities, as amended by Minister of Finance Decision No. 320/KMK.03/2002. That said, all unfinished construction activities initiated prior to this regulation’s issuance continue to be subject to the 2000 VAT regulation.
This regulation was issued on 22 February 2010, but will take into force on 1 April 2010.
Taking force at the end of this month, Minister of Finance Regulation No. 39/PMK.03/2010 on the Limitations and Procedures of Value Added Tax Imposition on Private Construction Activities will do one thing: apply value-added tax (VAT) on private construction activities that meet certain criteria, which the regulation sets out.
Buildings that meet all of these criteria will be subject to VAT: (1) are mainly made of wood, concrete, bricks, and/or steel; (2) destined for residency or business purposes, and; (3) command an area equal to or greater than 300 square meters. Although construction performed in stages is considered ‘one activity’ for tax purposes, the gaps between stages of construction may not exceed two years for that condition to be applicable.
The formula that will be used to calculate the VAT is:
10% x (40% of monthly construction expenses, not including land prices)
The tax must be paid every month to the State Treasury by way of a post office or reception bank. A report of the payment must be submitted to the closest Tax Office to the building, using the third page of a Tax Payment Form (Surat Setoran Pajak, also known as SSP3).
Clarified instructions for how to precisely fill out the Tax Payment Form, along with the practical side of how private construction VAT payment processes will be supervised, will be regulated in a subsequent Director General of Tax Regulation.
This regulation repeals and replaces Minister of Finance Decision No. 554/KMK.04/2000 on the Limitations and Procedures of [VAT] Imposition on Private Construction Activities, as amended by Minister of Finance Decision No. 320/KMK.03/2002. That said, all unfinished construction activities initiated prior to this regulation’s issuance continue to be subject to the 2000 VAT regulation.
This regulation was issued on 22 February 2010, but will take into force on 1 April 2010.
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