[Albert Yosua MatatulaParticipant Rookie]

Up

0

::

Long before the Law of the Republic of Indonesia concerning Harmonization of Tax Regulations (Undang–Undang Harmonisasi Peraturan Perpajakan/HPP Law) took effect in 2021, speculation swirled about the inclusion of inheritance taxes in the legislative overhaul. Despite early signals, then-Director General of Taxes Robert Pakpahan repeatedly clarified that no such tax was planned (Pajak, 2018).

Ultimately, the enacted HPP Law did not include inheritance as a taxable object. Under Article 4, Paragraph 3, Letter b, of the Law of the Republic of Indonesia concerning Income Tax (Undang–Undang Pajak Penghasilan/PPh Law) as amended by the HPP Law, inherited assets are explicitly excluded from taxable income.

While inheritance is not considered taxable income, undivided inheritance left by a deceased individual who was a resident is treated as a taxpayer under Indonesian law. This means the inheritance must fulfill the deceased’s tax obligations until the assets are distributed. Once divided, these responsibilities shift to the inheritors, as per Article 2, Paragraph 3, Letter c, of the PPh Law.

By contrast, many other countries impose taxes on inheritance. Japan, for instance, levies an inheritance tax of up to 55% on the net value received by inheritors after applicable deductions and exemptions. South Korea and France also impose significant rates, up to 50% and 45%, respectively.

Inheritance tax is generally defined as a levy imposed on the transfer of assets from a deceased person to their inheritors. While Indonesia avoids the term inheritance tax, inherited assets can still trigger liabilities through income tax schemes, land and building acquisition duty (Bea Perolehan Hak atas Tanah dan Bangunan/BPHTB), or when the inherited assets generate income in the future.

Under the PPh Law, inherited assets are not subject to income tax. Article 4, Paragraph 3, Letter a, affirms that inheritance is excluded from taxable income, meaning that recipients of inheritance are not required to pay income tax on the assets they receive.
However, if the inheritance takes the form of land or buildings, the recipient is still liable for BPHTB. This duty is governed by Law of the Republic of Indonesia Number 28 of 2009 concerning Regional Taxes and Levies. The BPHTB rate is 5% of the taxable object acquisition value (Nilai Perolehan Objek Pajak/NPOP), minus the non-taxable object acquisition value (Nilai Perolehan Objek Pajak Tidak Kena Pajak/NPOPTKP), the amount of which varies by local government. Furthermore, unreported inherited properties may face a 2.5% levy on transfers. To avoid this, taxpayers are advised to obtain a tax exemption certificate for land and buildings, as outlined in Director General of Taxes Regulation Number PER-8/PJ/2023 on Procedures for Income Tax Exemption on Income from the Transfer of Rights to Land and/or Buildings, Sale and Purchase Agreements for Land and/or Buildings and Their Amendments, and Exemption from Income Tax Collection on the Sale of Luxurious Residential Houses or Dwellings in Tourism Special Economic Zones.
Businesses or Shares Inheritance

Shares or businesses passed to inheritors aren’t taxed upon transfer. However, dividends or profits from these assets become taxable income. In this sense, inherited assets may lead to future taxable income.

The absence of a direct inheritance tax in Indonesia helps preserve family financial continuity and supports the sustainability of family-owned businesses. On the other hand, it also presents challenges related to wealth inequality. Reports by Oxfam and the World Bank reveal the wealthiest 1% in Indonesia controls over 45% of national assets. Progressive inheritance taxes could promote more equitable wealth distribution.

Economists and NGOs have called for Indonesia to explore a progressive inheritance tax, particularly targeting ultra-high-net-worth inheritance. However, obstacles persist in accurately appraising diverse assets, and potential resistance from wealthy elites that may strongly oppose measures seen as threatening intergenerational wealth.

While inheritance-related tax disputes are rare, disagreements over BPHTB and NPOP valuations are relatively common. In several cases, inheritors have taken legal action against local governments over BPHTB assessments they deemed excessive. These disputes highlight the importance of transparency and reform in inherited asset taxation, particularly in valuation practices.

Although Indonesia does not currently impose a direct inheritance tax, state revenue from BPHTB on inherited property remains substantial. Going forward, the government may need to reevaluate the inheritance tax framework on social equity and tax base expansion. Inheritance taxation could serve as a strategic tool to balance wealth distribution without hindering the economic mobility of families with a fair and transparent system.

Legal References

• Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax as Amended by Law of the Republic of Indonesia Number 7 of 2021 concerning Harmonization of Tax Regulations.
• Director General of Taxes Regulation Number PER – 8/PJ/2023 concerning Procedures for Income Tax Exemption on Income from the Transfer of Rights to Land and/or Buildings, Sale and Purchase Agreements for Land and/or Buildings and Their Amendments, and Exemption from Income Tax Collection on the Sale of Luxurious Residential Houses or Dwellings in Tourism Special Economic Zones.

[LiaParticipant Rookie]

This article clearly explains how inheritance is treated under Indonesia’s tax laws. It’s interesting to see that while there is no direct inheritance tax, there are still taxes like BPHTB and income tax on future earnings from inherited assets. The comparison with other countries helps show how Indonesia’s approach supports family wealth continuity, but also highlights concerns about wealth inequality. It’s a balanced overview that raises important points about fairness, transparency, and the possible need for reform in the future.