Introduction
Under the Indonesian Law on Income Tax (Undang-Undang Pajak Penghasilan), gift and inheritance may be exempt from income tax, provided that it meets certain conditions as will be discussed below.
Gifts
The person making a gift is not taxable upon giving. Any kind of gift received by a person from his/her one line family is non-taxable, i.e. mother/father to son/daughter or vice versa. Gift received by religious entity, education entity, or social entity may also be exempt. Gift received by sister from her brother is taxable, from uncle to niece is taxable, from grandfather to grandson is taxable, gift from friends (in large amount) is considered income and therefore taxable. If a gift is received by someone and is not exempt, the gift is taxable under the general income tax rules, up to 30% if the recipient is an individual, and up to 25% if the recipient is a company.
Inheritance
Unlike gifts, receiving inheritance is non-taxable, provided that the asset is recorded and/or clearly given to the person in the deed of inheritance (Akte Wasiat).
An estate of the deceased that is not yet distributed to the heirs may be subject to tax (Warisan yang Belum Terbagi). This means that, the income that is derived from the assets will remain taxable. This is to avoid the recipient postponing recording the inherited assets in their annual income tax return, thus deferring the tax.
Gifts and Inheritance in the form of Land/Buildings located in Indonesia
The same rule for taxability of gifts and inheritance applies. Whether the land/building is taxable or exempt from tax, the recipient would have to pay for changing the name in the title deed. This is called the BPHTB (Bea Perolehan Hak Atas Tanah dan Bangunan). The rate for BPHTB is up to 5%.
Applicability for Expats residing in Indonesia
As an Indonesian tax resident, you are subject to Indonesian taxation rule and regulations, and required to report your worldwide income in your annual tax return in Indonesia. Therefore, if you have received any gifts or inheritance while residing in Indonesia, you are obliged to report these in your annual income tax return. In addition to the abovementioned taxes that applies on gifts and inheritance in Indonesia, one should also pay attention to the applicable rules that may apply on the jurisdiction or the location of assets where the other person is a tax resident.