A judicial review hearing of the Law on Financial Relations between Central-Regional Governments, Tuesday (12/12/2023) to hear the President’s testimony. Photo by MKRI/Ilham W.M.

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JAKARTA (MKRI) — Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law) aims to increase revenue from fees for acquiring land and building rights (BPHTB), providing legal certainty and justice for the community through the opportunity to obtain rights to land and/or buildings. The HKPD Law also simplifies the taxation system by simplifying tax types, tax rates, and methods of paying taxes so that hopefully tax will be more fair and reasonable and encourage taxpayers to carry out their obligation to pay taxes consciously.

Such was the Government/President’s statement conveyed by Director-General of Fiscal Balance Luky Alfirman at another material judicial review hearing Article 44 paragraph (2) letter a point 7 and Article 49 letters a, b, and c of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law) on Tuesday, December 12, 2023 in the plenary courtroom. The third hearing for case No. 117/PUU-XXI/2023, filed by notary Budi Wibowo Halim, was chaired by Constitutional Justice Suhartoyo.

Luky explained that state financial management had not only been carried out by the central government, but also by local governments, with the principle of regional autonomy as stated in Article 18A paragraph (1) of the 1945 Constitution. The right to regulate this is followed by fiscal decentralization arrangements to achieve the state goal of a just and prosperous society equally. Local tax, Luky continued, is a fiscal decentralization policy that reflects democratic values. As a form of community participation, it is obligatory to pay BPHTP, the results of which are utilized by the local government to build facilities and infrastructure and the public interest of the region.

“Based on the Government’s data, BPHTP tax is one of local taxes that contributes greatly to regional revenues. Thus, the judicial review of this Law will have an impact on local governments if the petition is granted,” he said. 

Local Government’s Authority

The Petitioner’s argument that the inconsistency of the implementation of the article had resulted in two times of imposition of BPHTB because the registration process was carried out in two stages does not prove that the article is problematic, Luky added. This is because the problem occurred during land registration process, while the imposition of BPHTB by the local government followed the legal action that became the tax object of BPHTB imposition during the land registration process. In essence, legal subjects who obtain rights to land and/or buildings from other parties in the same certificate are obliged to pay BPHTB for the rights they receive. So, the Petitioner’s inability to pay BPHTB for inheritance he received was not at all caused by Article 44 paragraph (2) letter a point 7 of the HKPD Law.

“Meanwhile, the regional revenue office’s interpretation to impose inheritance BPHTB for the registration of transfer of rights from the name of the testator to all heirs and BPHTB of separation of rights resulting in transfer is a matter of implementation of the norm and is not related to the constitutionality of the norm. It should also be noted that basically the regulation of tax imposition in accordance with Article 44 paragraph (2) letter a point 7 of the HKPD Law is within the full authority of the region to regulate and collect the regional tax,” Luky explained.

Also read:

Inheritor Questions Property Acquisition Duty for Inheritance

Petitioner Affirms Reason to Challenge BPHTB Provisions on Inheritance

At the preliminary hearing on Wednesday, October 4, the Petitioner revealed that he was one of inheritors based on the inheritance deed No. 06/2021 dated April 5, 2021 but had not yet listed the transfer of right to the local land office because he could not afford the duty on acquisition of land and building (BPHTB) for the inheritance yet. Thus, he believes he could suffer constitutional loss due to Article 44 paragraph (2) letter a number 7 and Article 49 letter b of the HKPD Law, which regulates the tax on acquired land and/or building originating from the separation of rights that results in transfer or rights.

Meanwhile, the separation and division of inheritance from all inheritors to one or more (not all) is not a form of transfer of rights, so it is not included as part of BPHTB payable. This has created legal uncertainty for the Petitioner in the imposition of BPHTB tax because it is subject to BPHTB for the separation and division of inheritance which should not be BPHTB. The Petitioner should only be subject to inheritance BPHTB, but because Article 44 paragraph (2) letter a point 7 and Article 49 letter b of the HKPD Law are unclear, he could potentially be subject to inheritance BPHTB and right separation BPHTB, which results in the transfer of rights. As a result, there is no basis for the amount of tax, thus creating problem for the inheritors.

“The Petitioner’s constitutional loss would not happen if the Court declare the word ‘bequests’ in Article 49 letter b of the HKPD Law unconstitutional and not legally binding and must be interpreted as ‘for bequests, on the date the transfer of rights is registered to the land office,’” said the Petitioner on site from the plenary courtroom. 

Author       : Sri Pujianti
Editor        : Nur R.
PR            : Andhini S.F.
Translator  : Yuniar Widiastuti (NL)

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

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