Foreigners have limited rights in Indonesia compared to local people while in Europe foreigners have usually the same rights as Indonesian. When it comes to inheritance it is important to prepare it in advance to avoid surprises when you want to transfer to your kids your investment. For an investor or spouse of an Indonesian it is crucial to prepare the future of your heirs on the legal and tax aspects. Inheritance can vary from the religion and tax can be affected.
Legal Framework for Inheritance Indonesia
General law
For foreigners living or investing in Indonesia, it is recommended to not 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 descendence and spouse for non muslim. As a woman you could be left with nothing if the kids of your spouse is a man. 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 muslim:
- 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 concept that men legally bear the financial responsibility for the family.
- 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 according to 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 to draft 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 kind of nominee structure. Unfortunately most of those stories don’t finish well and dispute can raise. Mixed marriage in Indonesia doesn’t give the spouse the right to inherit the land. The certificate Hak Milik (SHM) still stay accessible only to Indonesian Citizen. It means without a proper prenup or contract the property can go directly to the kids of the husband or wife and you might be kicked out of the property even if you have invested the majority of the investment. Protect your investment. Consult with us.
There exists different ways to protect yourself by securing the property as a Hak Pakai under your name or to transfer the land under a PT PMA as Hak Pakai or HGB. With this mechanism, the shares are transferred and not the land. It means you can keep your shares and only the shares of the spouse 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 to write a WILL to protect your interests and notarize this document to ensure it will be recognized by the authorities and the court when it will be necessary. We recommend writing this in 2 languages, in English and in Bahasa Indonesia to ensure there is no doubt on your intention and everyone can understand it.
How to structure a PT PMA
At ILA we always insist to ensure to protect your assets under a holding in Indonesia. Having a holding 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 and one is a criminal act.
Tax on Inheritance in Indonesia
One of the aspects when it comes to inheritance and how to define the best way to transfer your assets is to understand the taxes that can face your heirs in case of asset transfer.
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 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 biggest cost when inheriting real estate (houses, land, apartments). When the title is changed from the deceased’s name to the heir’s name, the local government charges a duty at 5% of the property 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. |
