Get to Know the Tax Aspects of the Parking Business Before Starting Your Business

Starting a venture in the parking business is promising, as the rapid growth of private vehicle numbers in Indonesia creates increasing profit opportunities.

To get started, you can begin by looking for and utilizing empty land for motorcycle parking or by developing a suitable area for car parking services.

However, to make this a reality, there are several things you need to prepare, such as capital, land, legality, and knowledge.

One essential area of knowledge is understanding tax regulations. Like any other business, the parking business also has unique tax aspects that may not be found in other industries.

Generally, there are three key tax provisions to pay attention to. First, provisions related to Income Tax. Second, provisions related to Value-Added Tax (VAT). Lastly, provisions regarding local taxes.

Each of these taxes arises based on the activities or business processes involved in running a parking business. For example, parking land rental, managing parking spaces owned by others, and providing parking spaces to vehicle owners.

Read: Ministry of Finance Extends 0% Import Duty on Electric Vehicles Until 2025

Parking Space Rental

Parking rentals are not uncommon, especially for vehicle owners who do not have parking spaces at home or need parking spaces in certain buildings, such as office buildings.

For the lessor, whether an individual or a business entity, Income Tax Article (ITA) 4 paragraph 2 applies to rental transactions for land and/or buildings. To calculate this, the applicable rate of 10% is multiplied by the gross amount or rental value.

A detailed explanation can be found in Government Regulation No. 34 of 2017. This regulation states that income from the rental of land and/or buildings, whether in part or in whole, is subject to final Income Tax. This applies to both individuals and companies.

If a parking user makes a reservation or booking for a parking spot in a designated area, the transaction will also be subject to Income Tax Article 4 paragraph 2.

It should be noted that additionally, according to tax regulations, parking rental transactions are subject to Value-Added Tax. Therefore, if the landowner is a VAT-registered person (PKP), they are required to collect VAT at the current rate of 11% on the entire rental value.

Read: Government-borne VAT Facility for Electric Cars Continues in 2024

Parking Space Management Services

To run a parking business, you can also collaborate with landowners. In this case, you won't need to pay for parking space rental, but can instead create a profit-sharing agreement. This concept is commonly used by parking management companies in collaboration with shopping mall owners or other building owners.

For parking space management services, Income Tax Article 23 and Value-Added Tax will apply. This is regulated under the Minister of Finance Regulation No. 70 of 2022 (PMK No. 70/2022). As a result, the taxes collected will become revenue for the Central Government.

Read: Electric Car VAT is Overpaid, VAT-Registered Persons are Now Eligible for Preliminary Restitution

Parking Space Provision Services

The final tax aspect to understand is related to parking space provision services. The fees paid by vehicle owners to parking service providers are subject to local taxes, specifically the Specific Goods and Services Tax (PBJT).

Collected by Local Governments

This is regulated in Law No. 1 of 2022 on the Financial Relations between the Central Government and Regional Governments (UU HKPD). The PBJT rate is determined by each region, while the UU HKPD sets the maximum rate, which is 10%.

The PBJT on parking services will be the responsibility of the consumer, who will pay it to the parking service provider. The provider then collects the tax and remits it to the local government, along with the necessary reporting.

Not Subject to VAT

Since parking services are considered a local tax object, the central government does not have the authority to collect taxes on such services. This is explained in PMK No. 70/2022. Certain services in the provision of parking spaces are subject to regional taxes and levies. Therefore, these services are not subject to VAT.

Here is a summary of the tax obligations:

Types of Transaction	Object
	Income Tax	Local Taxes/VAT
Parking Space Rental	Income Tax Article 4 paragraph (2)	VAT
Parking Space Management Service	Income Tax Article 23	VAT
Parking Space Provision Services	Not Subject to Income Tax	Local Taxes

Thus, to ensure compliance with tax obligations when running a parking business, it’s important to understand the business model being implemented. (ASP/KEN)