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 their name.
Why 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 an HGB title (freehold). For professional guidance on property investments in Indonesia, visit Real Estate & Property Advisory. An HGB title is a form of ownership, whereas a leasehold agreement is a rental contract for a set period.
An HGB title is granted for 30 years, with an extension of 20 to 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, a foreigner can legally rent it out, whereas 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. The nominee structure is illegal, and it is difficult to recover the property in the event of a dispute. We have seen many disputes involving nominees, costing foreigners a lot of money. DO NOT use a nominee if an alternative exists.
PT PMA helps with 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 huge and affects the Return on Investment. For tailored tax planning and compliance, check Tax & Accounting Services.
Property title and license 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 to ensure compliance and protection of your interests.
- Establish your PT PMA with the correct license (NIB) and obtain your sertifikast Standard
- Sign a pre-agreement and do not pay the seller directly to its bank account. Always use an escrow account and pay after signing a pre-agreement
- Perform due diligence to confirm the land is suitable for the activity. Use a third party, not the one from the seller. The due diligence has to check the access road, tax, zoning, land and building ratio, and ownership
- Review and sign a sales and purchase agreement. Ensure this agreement is reviewed by a lawyer. Notaries are witnesses and do not deal with negotiation
- Pay the tax related to the transactions at the BPN (Land office)
- 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 risks that can be costly.
- Invalid contract or not in line with Indonesian law
- An illegal construct with a 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 hundreds of thousands of 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.
