The Financial Services Authority (FSA) will loosen several regulations on financial market products to give them the ability to absorb repatriated funds, including initial public offering (IPO), private equity funds, Real Estate Investment Trusts (REIT) and Asset-backed Securities. This aims to prevent bubble from occurring when inflows of repatriated funds are not balanced with financial market instruments.
“Tax amnesty will raise demand towards capital market instruments. Hence, they should be available amid domestic market. If there is an inflow of funds worth Rp 1,000 trillion while instruments remain unchanged, bubble will occur,” said Nurhaida, Chief Executive of Capital Market Supervision at FSA. FSA will speed up statement for IPO listing, issuance of new shares and bonds.
Double tax regulation that burdens REIT issuance will also be relaxed. Bambang Brodjonegoro, the Finance Minister, said that the President Joko Widodo has summoned regional heads to lower Acquisition Fees for Land and Building (BPHTB) tax from 5% to 1%. “So, for assets up to Rp 10 billion, there should be a 1% BPHTB tax plus 0.5% final Income Tax, a total of 1.5% to become an incentive for REIT issuance,” Bambang explained. For assets with value over Rp 10 billion, final Income Tax is 2%.
So far, there is only one REIT product in Indonesia from PT Ciptadana Asset Management with a property in Solo as an underlying asset whose AUM amounts to Rp 534.31 billion. PT Lippo Karawaci Tbk (LPKR), one of the large property developers, has issued two REITs worth Rp 30 trillion listed in Singapore Exchange. (*)
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