For foreigners, there are basically three options to legally secure a property in Indonesia.
- Indonesian Nominee Power of Attorney Agreement
- PMA Foreign Investment Company Structure
- Leasehold Investment
Which option to choose? That depends on your personal situation. A short explication:
Indonesian Nominee Power of Attorney Agreement
Foreign Investors are not entitled to own ‘freehold’ property known in Indonesia as the Right of Ownership (Hak Milik). Therefore it is important to have good connections with an Indonesian resident! Should you not have any contacts, we would be more than happy to assist you with that. The Indonesian nominee will have to sign four documents with the foreign investor:
- A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.
- A Right of Use agreement: allows the foreigner to use the land.
- A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.
- Power of Attorney: The nominee signs an irrevocable Power of Attorney giving the foreigner the complete authority sell, mortgage, lease or otherwise deal in the land.
Founding a PMA (Penanaman Modal Asing )
The most significant change in Indonesian investment law came in 1997 when the government introduced the PMA (Penanaman Modal Asing or Foreign Investment Company). This allows foreign investors to set up a company in Indonesia, without having to have Indonesian partners.
The PMA can be 100% owned by the foreign investor. PMA companies are allowed to own the title of the property for a period 25 years and have to be renewed by the government. What do you need to found a PMA?
- Submit the detailed business plan.
- Operate in a business environment that adds value to Indonesia in terms of foreign skills, employment and environmental benefit.
- Make an appropriate cash deposit in an Indonesian based Bank. The amount varies and is calculated from the capital employed in the business.
- Show the property investment as an asset of the company.
The process takes approximately 3 to 4 months and once its completed; the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up the PMA is between IDR 30 to 40 Million or equivalent with USD 4,500 / € 3,070.
A foreigner can acquire a leasehold title (Hak Pakai) with a title lasting for 25 years. This title can be extende with 30 years for a maximum of 55 years after which the leasehold then reverts to the original owner (lessor).
Notary: 1% – 1.5% of the value of the transaction.
Vendor Tax & Purchaser Tax: Both the vendor and purchaser pay 5% tax on the value of land and property sales.
Mortgage Certificate: 2% of value of mortgage.
Legalising your transactions
We recommend that you seek the best professional and legal advice to fully check all land titles, certificates of ownership and building permits, and that you have all transfer of lease or ownership documentation prepared by a reputable legal notary. Our office in Lombok is very experienced in making sure that you as an investor receive the best professional and legal advice.