The residential rental market, including rooming houses and leased houses, continues to expand as population mobility and urbanization increase and more students and workers live away from their hometowns. According to the POI Data Platform (2026), Indonesia had 41,306 active rooming houses as of April 2026.
The market size is also reflected in Indonesia’s student population. The Higher Education Database (Pangkalan Data Pendidikan Tinggi/PDDikti) recorded 7,369,009 active students in the first semester of the 2024/2025 academic year. In Surabaya alone, the city government recorded around 6,000 rooming houses and 41,726 non-permanent residents registered in its population administration system as of September 2025.
The scale of residential rental activity has recently drawn attention from fiscal authorities. During a public hearing on the 2027 state budget bill in early August 2026, Rofyanto Kurniawan, Director of State Budget Formulation at the Ministry of Finance’s Directorate General of Budget, identified ownership of multiple homes that are not all occupied by their owners as one area with potential to broaden the government’s revenue base.
Not a New Tax
The statement raised concerns about higher taxes and rental prices. However, the government has emphasized that taxation of rental income is not a new policy. Minister of Finance Purbaya Yudhi Sadewa reiterated that income earned from renting out residential property has long been subject to tax under existing regulations.
"This is not a new tax. It is simply business as usual,” Purbaya said at the Ministry of Finance on August 12, 2026.
He also stated that the Directorate General of Taxes (DGT) had not been instructed to target rental property owners specifically.
“If there is income, it is normally subject to tax. But there has been no instruction to pursue rental property owners specifically,” he said.
The DGT has similarly stated that tax compliance monitoring continues based on each taxpayer’s risk profile, with no special compliance program specifically targeting residential landlords.
Tax Rules for Rental Income
Several regulations govern income from property rentals. The primary legal basis is 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 (HPP Law).
Government Regulation (Peraturan Pemerintah/PP) Number 34 of 2017 concerning Income Tax on Land and/or Buildings Rental sets out more specific provisions and has been in effect since January 2, 2018.
Meanwhile, Law of the Republic of Indonesia Number 8 of 1983 concerning Value-Added Tax, as amended by the HPP Law, governs value-added tax (VAT). Local taxes are regulated under Law of the Republic of Indonesia Number 1 of 2022 concerning Financial Relations Between the Central and Regional Government (HKPD Law).
Although rooming houses and leased houses are both accommodation rental businesses, they are not necessarily subject to the same tax treatment.
In an article published on August 11, 2026, the DGT explained that Article 2(3) of PP Number 34 of 2017 exempts income from lodging and accommodation services from the final income tax regime applicable to the rental of land and/or buildings.
The elucidation specifies that lodging services include rooms, student dormitories, worker dormitories or lodgings, and rooming houses.
The DGT also distinguishes between a rooming house and a leased house. A rooming house typically consists of a single house divided into several rooms, with residents sharing bathrooms and kitchens. A leased house, by contrast, may consist of independent units, each with its own entrance, bathroom, kitchen, and electricity meter, which are rented exclusively under longer-term agreements.
The classification does not depend solely on what the property owner calls the accommodation or how rent is paid. When determining the tax treatment, you must also consider the property's actual characteristics and the overall nature of the transaction.
10% Final Income Tax on Leased House
Income from the land and/or buildings rental is subject to final income tax under Article 2(1) in conjunction with Article 4(1) of PP Number 34 of 2017. The tax is imposed at 10% of the gross rental amount.
The gross amount as the tax base includes all payments or amounts payable in connection with the rented land and/or building. This amount may include maintenance, repair, security, service, and other facility charges, whether stated separately or incorporated into the rental agreement.
Since the tax is final, owners cannot deduct expenses incurred to earn rental income from the tax base.
Rental property owners also cannot apply the income tax exemption available to individual taxpayers on the first IDR 500 million of gross business turnover. This incentive does not apply to income from renting land and/or buildings.
Withholding and Paying Income Tax
How the tenant pays final income tax depends on their status. If the tenant must withhold tax, such as a government institution or a resident corporate taxpayer, the tenant withholds the final income tax from the rental payment and provides the property owner with a withholding tax slip. The tenant is then responsible for remitting the tax under prevailing rules.
If the tenant is an individual who has not been appointed as a withholding agent, the property owner must pay the final income tax directly.
For instance, suppose a house is rented to an individual for a year for IDR 24 million. The final income tax payable is 10% × IDR 24 million, or IDR 2.4 million. Because the tenant is not a withholding agent, the owner must pay the income tax.
If the owner pays the tax directly, they must pay using a tax payment slip or electronic billing code no later than the 15th day of the month following the end of the relevant tax period. Where the tenant withholds tax, the income tax must be remitted no later than the 10th day of the following month.
Income that has been subject to final income tax must still be reported in the tax return under the section for income subject to final tax. Unreported rental income may result in tax adjustments if discrepancies are identified during an audit or compliance review.
Income Tax on Rooming House Businesses
Income from operating a rooming house is not subject to the final income tax on land and/or building rentals under PP Number 34 of 2017. Nevertheless, it remains taxable as business income.
Under PP Number 20 of 2026, eligible individual taxpayers may apply the 0.5% final income tax rate to their gross business turnover, provided annual gross turnover does not exceed IDR 4.8 billion within one fiscal year.
Individual taxpayers using the 0.5% final income tax regime may also benefit from an income tax exemption on the first IDR 500 million of annual gross turnover, subject to applicable requirements.
This IDR 500 million exemption does not apply to income from leased houses subject to the 10% final income tax under PP Number 34 of 2017. The entire gross rental amount remains subject to the 10% final income tax.
If annual gross turnover from a rooming house business exceeds IDR 4.8 billion, the income is no longer eligible for the final MSME income tax regime. It becomes subject to the general income tax provisions. Individual taxpayers are subject to the rates under Article 17 of the Income Tax Law. At the same time, businesses operated through corporate entities are subject to the rate stipulated in Article 17(1)(b) of the Income Tax Law.
VAT on Rooming Houses and Leased Houses
The rental of rooming house rooms is generally not subject to VAT. Article 4A of the VAT Law exempts hotel services from VAT, including the rental of rooms and/or spaces subject to local taxation.
Leased houses are treated differently. Income from land and/or buildings rental may be subject to VAT if the property owner is registered as a taxable entrepreneur (pengusaha kena pajak/PKP). One requirement for PKP registration is annual gross turnover exceeding IDR 4.8 billion.
In such circumstances, the owner collects VAT from the tenant in addition to the rent and issues a tax invoice. However, the applicable treatment depends on the owner’s PKP status and the transaction's specific characteristics.
Local Tax on Rooming Houses
In addition to national taxes, rooming house businesses may be subject to the certain goods and services tax (pajak barang dan jasa tertentu/PBJT) for hotel services under the HKPD Law.
The HKPD Law amends the previous rules under Law of the Republic of Indonesia Number 28 of 2009. Under the former regime, a rooming house was classified as subject to hotel tax only if it had more than 10 rooms. The HKPD Law removed this room-number threshold and expanded the scope of taxable accommodation to include private residences used to provide hotel-type services.
As a result, a rooming house may be subject to PBJT on hotel services regardless of the number of rooms. Each regional government determines the applicable rate. For example, Special Capital Region of Jakarta Regional Regulation Number 1 of 2024 imposes a 10% PBJT rate on hotel services, calculated based on the amount the customer pays.
The taxpayer for PBJT on hotel services is the owner or operator of the rooming house that directly provides accommodation to the end customer. The tax base is the amount the customer pays.
For instance, if a rooming house costs IDR 1 million per month and a 10% PBJT rate applies, the tenant would pay IDR 1.1 million. The additional IDR 100,000 represents PBJT collected by the owner and subsequently remitted to the relevant regional government in accordance with prevailing regulations.
In addition to tax obligations, owners of rooming houses and leased houses should also consider business licensing requirements, including obtaining a business identification number (nomor induk berusaha/NIB) under the appropriate business classification.
Tax Compliance
Owners of rooming houses and leased houses should maintain complete records of rental receipts and retain supporting tax documents, including proof of payment and withholding tax slips. They should also ensure that information on property ownership and their reported tax obligations accurately reflects their actual business activities. Tax compliance monitoring may use information from third-party sources, including data relating to property ownership and property-related activities.
Owners with multiple rental properties should therefore ensure that all rental income is properly recorded and reported. If the business structure or transaction is more complex, consult the relevant tax office or a tax professional to determine the appropriate tax treatment.
Conclusion
Rooming houses and leased houses are treated differently for tax purposes. Income from leased houses is subject to 10% final income tax on the gross rental amount under PP Number 34 of 2017. The IDR 500 million gross turnover exemption does not apply to this income category.
Rooming house income, meanwhile, is not subject to the final income tax regime for the rental of land and/or buildings. Eligible individual taxpayers may apply the 0.5% final MSME income tax rate and benefit from the exemption on the first IDR 500 million of gross turnover.
From a local tax perspective, rooming house businesses may also be subject to PBJT on hotel services under relevant regional government regulations. VAT treatment, meanwhile, depends on the nature of the service and the owner’s PKP status.
These differences make it important for property owners to first determine the actual nature of their rental activities before calculating and fulfilling their tax obligations. If you need assistance in assessing the tax implications of your residential rental business, Ideatax is here to help.
Legal Basis
- 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.
- Law of the Republic of Indonesia Number 8 of 1983 concerning Value-Added Tax and Luxury Goods Sales Tax, as amended by Law of the Republic of Indonesia Number 7 of 2021 concerning Harmonization of Tax Regulations.
- Law of the Republic of Indonesia Number 1 of 2022 concerning Financial Relations Between the Central and Regional Government.
- Government Regulation Number 34 of 2017 concerning Income Tax on Land and/or Buildings Rental.
- Government Regulation Number 23 of 2018 concerning Income Tax for Taxpayers with Specific Gross Turnover Thresholds, as amended by Government Regulation Number 55 of 2022 and Government Regulation Number 20 of 2026.
Special Capital Region of Jakarta Regional Regulation Number 1 of 2024 concerning Regional Taxes and Regional Levies.
Also Read:
Complete List of Tax Account Codes and Tax Payment Type Codes for e-Billing
DGT Regulation Number 11 of 2025
Breaking Down the Article 21 Withholding Tax Provisions