OWNERSHIP IN INDONESIA
INDONESIAN FOREIGN OWNERSHIP LAWS AND REGULATIONS
Buying a property or a business in Bali can be a daunting process especially as a foreigner, our house legal team can advise you of the correct procedure and licenses required to safeguard your investments. We will guide you through the process step by step and can take care of all license applications and company setups using our network of trusted notaries and lawyers.
UNDER A FOREIGN INVESTMENT COMPANY
Law 5 of 1960 regulates property and real estate ownership in Indonesia, with two types of rights:
- Right to Own (Hak Milik)
- Right to Build (Hak Guna Bangunan)
Many foreign investors in Bali think the way to purchase property in Bali is by using an Indonesian citizen (a nominee) to act on their behalf to acquire the Hak Milik certificate.
However, it is a tremendously risky practice as the local nominee can overtake the property and there is not much a foreign buyer can do to protect their investment.
The safest way for a foreign national to invest in property in Bali is to do it through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) license.
A PT PMA is a foreign limited liability company in Indonesia. With a PT PMA, you will have the right to acquire the Right to Build (Hak Guna Bangunan/ HGB) and Right to Use (Hak Pakai/HP) licenses.
RIGHT TO USE
The right to use the land for a specific and pre-agreed purpose for a defined amount of time. This can be held by an Indonesian national, foreigners domiciled in Indonesia, foreign investment companies (PMA), and representative offices.
HAK GUNA BANGUNAN
RIGHT TO BUILD
The right to build title (Hak Guna Bangunan or HGB) gives the holder the right to possess the land for an 80-year period, with the freedom to construct and develop buildings on the land during that period. HGB can be owned by an individual who is an Indonesian citizen, or by a legal entity, including a PMA-licensed company.
RIGHT TO OWN
Freehold title that can be bought, sold, mortgaged, and inherited and is only available for Indonesian nationals and Indonesian corporations. International corporations cannot hold a freehold title.
OF BUYING PROPERTIES SAFELY
To acquire Hak Pakai, you will need to submit a packet of completed forms to the Indonesian National Land Office (BPN), requesting Hak Pakai over the property and including relevant supporting documents.
Once you have shown proof of land payment and the conditions of Hak Pakai are met and built with a correct building permit (IMB), the BPN will issue a Hak Pakai Certificate under your company name.
As with setting up a PT PMA, Bali Green Investment are here to assist you throughout the entire process. Also, make sure to follow the land due diligence checklist when buying a property in Bali.
You can also inherit it to a family member, lease it to other people, or even sell the Hak Pakai to an Indonesian.
If you wish to hold the property for more than 70- 80 years, you can acquire a new Hak Guna Bangunan and a Hak Pakai once the old licenses expire.
Note that you can hold Hak Pakai only if the land already has a building on it. There is also minimum value to the property and it must be located in tourism, residential, or a trading area as you cannot acquire land in Bali in agricultural or greenbelt zones.
VISA OPTIONS IN INDONESIA
With our professional advice and personalized service, the details of Indonesia’s immigration and visa laws and regulations are easy to navigate and understand, making an investment in one of the world’s most idyllic locations clear and painless.
A company is subject to the tax obligations set by the Indonesian government if the company's domicile is in Indonesia. Similarly, a foreign company that has a (permanent) establishment in Indonesia - and carries out business activities through this local entity - falls under the Indonesian tax regime. If the foreign company does not have a permanent establishment in Indonesia but does generate income through business activities in Indonesia, then it needs to settle its tax liabilities through withholding of the tax by the Indonesian party paying the income.