Foreigners in Indonesia have fewer rights than local people, whereas in Europe, foreigners usually have the same rights as Indonesians. When it comes to inheritance, it is important to prepare in advance to avoid surprises when you want to transfer your investment to your kids. For an investor or the spouse of an Indonesian, it is crucial to prepare the future of your heirs on the legal and tax aspects. Inheritance can vary by religion, and taxes can be affected.
Legal Framework for Inheritance in Indonesia
General law
For foreigners living or investing in Indonesia, it is recommended not to let any interpretation in your choice and to be clear on your intention regarding your heirs and to whom you are looking to transfer your assets. Indonesia follows the principle of the first descent and spouse for non-Muslims. As a woman, you could be left with nothing if the kids of your spouse are men. The case of the spouse is very critical, especially if you are the one who invested most of the money and your husband or wife is the one transferring to the kids from a first wedding.
Need help with inheritance planning? Contact us today.
Key Principles for non-Muslims:
- Priority: The spouse and children are the first priority. They inherit equal shares.
- No Gender Bias: Sons and daughters receive equal shares.
- Legitime Portie (Forced Heirship): A testator cannot give away their entire wealth to strangers if they have children or a spouse. A certain portion (usually 1/2 to 3/4) is legally reserved for the direct lineage.
- Groups of Heirs: If there are no spouses/children, the inheritance moves up to parents/siblings, then grandparents, and finally to other relatives up to the sixth degree.
Key Principles for Muslim:
- Fixed Shares: The Quran specifies exact fractions for specific family members (e.g., 1/2, 1/4, 1/8).
- Gender Distinction: Generally, male heirs receive a share that is double that of female heirs of the same rank (e.g., a son gets twice as much as a daughter), based on the principle that men are legally responsible for the family’s finances.
- Limitations on Wills: A Muslim can only bequeath up to 1/3 of their estate through a will to non-heirs or for charity. The remaining 2/3 must be distributed in accordance with Islamic inheritance rules.
It is important to know that children cannot be disinherited.
Notary WILL in Indonesia and overseas
To make it clear, we strongly recommend drafting a WILL in Indonesia to avoid any doubt on your intentions. This will be recorded with a video that will be a proof of your intentions and how you want to allocate your assets.
A WILL written overseas can also support your intention. The WILL can facilitate the transfer if there is any dispute between the heirs. We usually recommend doing a WILL in your country of residence and in Indonesia.
Secure your Property investment
It is very common to see people investing through their husband, wife, or boyfriend/girlfriend, using a nominee structure. Unfortunately, most of those stories don’t finish well, and disputes can arise. Mixed marriage in Indonesia doesn’t give the spouse the right to inherit the land. The certificate Hak Milik (SHM) still remains accessible only to Indonesian citizens. It means that without a proper prenup or contract, the property can go directly to the husband’s or wife’s kids, and you might be kicked out of the property even if you have made the majority of the investments. Protect your investment. Consult with us.
There are different ways to protect yourself by securing the property as a Hak Pakai in your name, or by transferring the land under a PT PMA as a Hak Pakai or HGB. With this mechanism, the shares are transferred and not the land. It means you can keep your shares, and only your spouse’s shares are transferable. It is important to consider a PT PMA as a protection and not a cost even if we hear sometimes, it is ok I trust him/ her.
How to write a Prenup or a WILL in Indonesia
At ILA Global Consulting, we can assist you in drafting a WILL to protect your interests and have it notarized to ensure it is recognized by authorities and the court when necessary. We recommend writing this in 2 languages, English and Bahasa Indonesia, to ensure there is no doubt about your intention and that everyone can understand it.
How to structure a PT PMA
At ILA, we always insist on protecting your assets under a holding in Indonesia. Holding assets in Indonesia is the best way to secure your assets. A common mistake is to think that taxation is more advantageous under personal names. This works only if you don’t declare the assets. Indonesia is changing, and we don’t recommend avoiding taxation. There is a difference between tax optimization and tax avoidance in Indonesia. One is smart; the other is a criminal act.
Tax on Inheritance in Indonesia
One aspect of inheritance is understanding the taxes your heirs may face when transferring your assets.
General taxation in Indonesia for inheritance
Property tax in case of inheritance
If you are a foreigner (or a foreign citizen inheriting from an Indonesian spouse/parent), a 1-Year Rule applies, as Foreigners are legally forbidden from owning Freehold Land (Hak Milik) in Indonesia. If you inherit a freehold title, you are required by law to sell it or transfer it to an eligible Indonesian citizen within one year.
The Property Tax (BPHTB) is the highest cost when inheriting real estate (houses, land, apartments). When the title is transferred from the deceased’s name to the heir’s name, the local government charges a duty of 5% of the property’s value (NPOP). However, many regions offer a 50% discount for inheritance transfers. This effectively brings the rate down to 2.5%. Also you are not taxed on the entire value. A certain amount is deducted before the tax is calculated.
Bank Accounts and Shares
There is generally no tax on inheriting cash in bank accounts, time deposits, or stocks. However, notaries will charge a fee for a notarized Inheritance Deed (Surat Keterangan Hak Waris) to release funds.
Summary for taxation of inheritance in Indonesia
| Cost Item | Charge | Notes |
| Inheritance Tax | 0% | Does not exist in Indonesia. |
| Property Transfer (BPHTB) | 5% | Varies by region; usually 50% discount applies. |
| Income Tax (PPh) | 0% | Must apply for SKB (Exemption Certificate). |
| Notary Fees | 1% | Fee for creating the Deed of Inheritance. |
| Outstanding Tax | At Cost | Heirs are liable for the deceased’s unpaid taxes. |
