To be clear, for foreigners a PMA is the only way to own and rent out a property legally in Indonesia. It doesn’t matter if you invest in Lombok, Bali, Sumba etc., a foreigner cannot own a property under its name.

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Why to own a property under a PT PMA in Bali or Lombok

Advantages

 

Once you want to invest in a property in Indonesia, the PT PMA is the only way to obtain a HGB title (freehold). For professional guidance on property investments in Indonesia visit Real Estate & Property Advisory. A HGB title is a form of ownership compared to a leasehold agreement that is just a rental contract for a certain period of time.

 

A HGB title is granted for a period of 30 years with an extension of 20 and 30 years. This title gives full ownership for a total period of 80 years. During this period the PT PMA can resell the property to an Indonesian citizen (as SHM) or to another PT PMA (as a HGB).

 

  • No devaluation compared to the leasehold
  • Full ownership (for a leasehold you are not the owner)

 

By having the property under the PT PMA the foreigner can rent out a property legally while it is not possible under a personal name. Unfortunately, some real estate developers think it is possible to rent out a property without a PT PMA but it is actually not legit.

 

With a PT PMA the foreigner has a corporate structure recognized by the Indonesian government. Foreigners do not need to use a local person to own a property. Nominee structure is illegal and it is difficult to get the property back if there is any dispute. We have seen a lot of disputes with nominees costing a lot of money to foreigners. DO NOT use a nominee if there is an alternative.

 

PT PMA helps for inheritance. It makes it easier to transfer the property to your heirs by transferring the shares.

 

A PT PMA has good tax advantages. While you purchase a PT PMA you can resell a freehold property with 2.5% tax only while a leasehold property will be taxed at 10% or at 20% under your personal name. The difference is hugged and affects the Return on Investment. For tailored tax planning and compliance, check Tax & Accounting Services.

Property title and licence you can have under a PT PMA in Indonesia

  • HGB (Hak Guna Bangunan): This title is ideal for land development, villas, hotels etc.
  • Hak Pakai is great for personal use and villa rentals
  • Hak Sewa (leasehold) is ideal for commercial activities

 

Once you have one of the titles, the advantage is that you can apply for the building permit (PBG) under your company and do not need the landlord or any other third party to manage your permit and construction. The building will be under your name.

 

Register your Property under your PT PMA

Registration process

The steps to register a PT PMA are simple. It is important to follow them one by one to avoid any surprises. We recommend always using an independent party ensuring compliance and protection of your interests. 

  1. Establish your PT PMA with the correct licence (NIB) and obtain your sertifikast Standard
  2. Sign a pre-agreement and do not pay the seller directly to its bank account. Always use an escrow account and pay after signing of a pre-agreement
  3. Perform a due diligence to confirm the land is suitable for the activity. Use a third party and do not use the one from the seller. The due diligence has to check the access road, tax, zoning, land and building ratio, ownership
  4. Review and sign a sales and purchase agreement. Ensure this agreement is reviewed by a lawyer. Notary are a witness and do not deal with negotiation
  5. Pay the tax related to the transactions at the BPN (Land office)
  6. Transfer of the land title under the PT PMA

For legal document support and contract reviews visit Legal & Regulatory Advisory.

Risk if you skip the process

By skipping some steps you expose yourself to some risks that can cost a lot.

 

  • Invalid contract or not in line with the indonesian law
  • Illegal construct with nominee
  • Seizure or destruction of the property for non conformity with the construction law (PUPR) as it happened in Bingin
  • Tax office fine for non compliance
  • Inability to operate legally and seizure of the villa

 

For an investment of thousands or hundred thousands dollars, having a check and paying a small cost to ensure everything is correct is not a cost, it is insurance and safety. You can contact us to ensure protection and sleep well for your investment.