Buying/Leasing Property in Bali Indonesia – The Legal Side
When considering property acquisition in Bali, it’s essential to navigate a landscape of nuanced regulations and evolving legal frameworks. At R Property, backed by over a decade of expertise, we adeptly maneuver through Indonesia’s intricate legal and governmental structures, ensuring a seamless buying experience for our clients.
Our seasoned team comprehensively understands the intricacies of Bali’s community system, offering invaluable guidance to navigate potential complexities. With a focus on transparency and security, we provide tailored assistance, leveraging the insights of trusted legal advisors and notaries to empower clients with informed decisions and a safeguarded transaction process. Trust R Property to be your partner in realizing your real estate aspirations in Bali.
Basic Legal and Taxation Guide for buying land in Indonesia
As you may be aware, the direct ownership of land, known as Hak Milik, is exclusively reserved for Indonesian citizens or entities.
Historically, foreign buyers have engaged in a common practice facilitated by notaries and legal professionals, wherein an Indonesian citizen acts as a nominee to purchase property on behalf of the foreigner. This arrangement, formalized through agreements between the local nominee and the foreign buyer, grants the latter rights of property usage and control.
However, in early 2015, the Minister of Agraria, overseeing the Land Department (BPN), issued a decisive statement prohibiting indirect land ownership or control by foreigners through nominee agreements. Properties acquired through such means are subject to potential seizure by the state.
Presently, individuals seeking to reside on or utilize properties in Bali have several options. Rather than relying solely on informal connections or unfamiliar legal channels, it is prudent to educate oneself on fundamental information pertaining to real estate transactions. Subsequently, seeking impartial and competent legal counsel and taxation advice is strongly recommended.
While some foreigners have encountered setbacks due to inadequate documentation, it is noteworthy that the majority have successfully entered into mutually beneficial contractual agreements for land usage or opted for conditional land titles, ensuring direct and undisputed usage rights. Understanding the basics of land law can greatly mitigate risks associated with property ownership.
At R Property, comprehensive and pertinent information is provided to clients embarking on property acquisitions. Additionally, we advise verifying this information with at least one other reputable source. We take pride in recommending independent, seasoned professionals in legal, taxation, architectural, and construction fields. By connecting with others who have navigated similar paths, clients can gain invaluable insights to inform their decision-making process effectively.
The Process
A Land Title Deed, known as the Sertifikat Tanah, serves as the authoritative document detailing ownership particulars and precise land descriptions, often accompanied by a Survey Certificate delineating boundaries.
This pivotal document forms the foundation for any transfer of ownership. Typically, a Land Deed Official, commonly a Notary holding the PPAT (Pejabat Pembuat Akta Tanah) designation, oversees the transaction’s legalization. Fees, including taxation, can be subject to negotiation within reasonable bounds.
Our consortium of Property Agencies collaborates closely with esteemed Notaries in Bali and maintains direct partnerships with the National Land Agency, BPN (Badan Pertanahan National). We take pride in our flawless track record of facilitating successful and undisputed property transactions.
Moreover, we ensure cost efficiency and transparency in all dealings, with expenses closely monitored and consistently competitive. Feel free to seek our insights on your purchasing plans; there’s no obligation on your part.
Depending on your specific circumstances and objectives, a spectrum of options awaits your consideration.
Ownership Options for Foreigners in Indonesia
A) Leasehold
Leasehold represents the prevalent form of land ownership among foreigners, providing a temporary interest in the land. Negotiated with the lessor, lease terms often span decades, with upfront payment common for the agreed tenure. While offering an opportunity for financial gain in the initial years, lease agreements stipulate that all improvements revert to the landowner at lease expiration, excluding non-fixed constructions. Sub-leasing is permissible, though selling the leasehold toward the lease term’s end can pose challenges. It’s imperative to include clauses for lease extension rights and rates in the initial agreement, typically set by benchmarking against comparable properties or standard commodities. While not registered with the Government Land Agency, lease agreements are legally safeguarded, subject to 10% PPH taxation.
B) Corporate Ownership via HGB Title
Establishing a Foreign Investment Company (PT PMA) enables land ownership under HGB title, albeit with relinquished freehold rights to the government. This title allows land utilization aligned with corporate activities and development. However, PT PMA regulations entail rigorous governmental oversight, necessitating regular reporting and annual audits. Before proceeding with corporate ownership, comprehensive legal and taxation counsel is advised to navigate regulatory complexities and tax implications.
C) Freehold Title (Hak Milik)
Reserved exclusively for Indonesian nationals, freehold title necessitates a nominee agreement with an Indonesian landholder to secure foreign interests. While the legality of nominee structures remains uncertain, selecting a trustworthy nominee is crucial, typically facilitated through recommendations from legal professionals or property agents. Notarized nominee agreements, drafted in English and Bahasa Indonesia, require meticulous attention to detail and legal expertise to mitigate potential disputes.
In navigating these ownership options, consulting experienced professionals is essential to ensure compliance with regulatory requirements and safeguard against legal complexities.
The Nominee Agreement comprises several essential sections:
- The Declaration: This section clarifies the intended real owner and the Nominee’s role in the transaction, outlining obligations such as tax payments, utility applications, and regulatory compliance for commercial activities, if applicable. The Nominee typically receives an upfront payment to compensate for administrative duties and a percentage of the sales price upon completion of service.
- Loan Agreement: The Nominee acknowledges receiving funds from the foreigner as a loan for property purchase, with terms detailing periodic adjustments to reflect property value changes. The property serves as collateral for the loan, including all improvements, with original titles and documents handed over to the foreign investor.
- Power of Attorney: Granting an irrevocable and transferable Power of Attorney, the Nominee empowers the foreigner to manage property transactions and represent them in disputes. Original titles and documents are transferred to the foreign investor.
- Legal Provisions: The agreement addresses potential legal changes affecting foreign ownership, converting to a long-term lease if laws disadvantage the foreigner or facilitating ownership transfer if laws favor them. Stamp duty fees apply, with exceptions for leases secured against taxes.
- Additional Security Measures: The foreigner may opt for a “mortgage” through the National Land Agency BPN, restricting Nominee property dealings until released by the foreigner via a notary, with minimal associated fees and no tax liabilities.
D) Right to Use over Freehold Title (Hak Pakai di atas Hak Milik)
The “right to use over freehold” is a certificate issued by the National Land Agency BPN, providing foreigners with a secure means of property control by explicitly listing their name as title owner in the Hak Pakai Certificate.
While offering unparalleled security, both the underlying Freehold Title (Hak Milik) and the Right to Use (Hak Pakai) title are subject to land taxation. Taxes are determined based on the Government-appointed Land Value NJOP (Nilai Jual Objek Pajak), typically assessed at a fraction of the market value. Initially granted for 25 years, the Hak Pakai title can be extended for two additional consecutive terms, potentially reaching up to 70 years, although future extensions are subject to current legal provisions.
It’s important to note that the above information does not substitute professional advice from legal and taxation experts. Careful selection of advisors and thorough verification of all obtained information is strongly recommended. For the full disclaimer, please click this link https://property-r.com/agency-disclaimer/