Legal and Taxation Guide for buying land /properties in Indonesia
Free Hold ownership is only available to Indonesian citizen or entities.
Due diligence and precautions are always top priorities in buying piece of land/properties. Below are some preliminary information, please red on;
The Land Title Deed (Sertifikat Tanah) stating the details of ownership and the precise description and location of the land and Survey Drawing Certificate (GS). Notary (PPAT – Pejabat Pembuat Akta Tanah) can help you verify the authencity of the Land Title Deed, as well as legalize the change of ownership/sale of the land/properties.
Ownership Options for Non Indonesian Citizen
Freehold Title ( HakMilik)
This title is NOT available for foreingers. Investors can choose a Nominee should ‘freehold” title is really the interest. The Nominee name will be on the Deed Certificate. A further Nominee Agreement should be formed and legalized by the Notary.
Beside the obvious upsides of this practice, there are several downsides that need to be taken into consideration such as possible disputes with the Nominee or nominees descendants, taxation, compensation for administration, death, missing nominees, fees etc. Normally a loan agreement will be required to help secure the ownership of properties, this agreement need to be adjusted periodically.
The Right to Use over Freehold Title (Hak Pakai di atas Hak Milik)
A ‘right to use over freehold’ is a certificate granted by the National Land Agency BPN over freehold land. We personally think this is the most proper way in controlling properties/land for foreigners. The foreigner’s name will be in the title of the HakPakai Deed. The downsides are land taxation which will apply to both deeds (the underlying freehold as well as the Right to use land (HakPakai)).
Leasehold
Longterm lease are very common practiced. Lots of lands are belong to the families, and are not allowed to be sold. However, most of the time, land owners are willing to lease the land/properties for longterm period such as 25 -30 years. Any improvements made upon the finished leased land, will be given back to the owner. Normally, no compensation will be paid out to the lessee.
Consider the option to extend the lease drawn up on the least contract.
Lease agreements are usually drawn up and legalized by a Notary, but are not registered with the Government Land Agency. However, strict laws are protecting the foreign or national lessee, making a lease a safe arrangement.
Corporate Ownership via HGB title
Foreign Investment Company (PT PMA). The HGB title allows the land to be used as per the Corporate Activity and to be built upon, normally upon 30 years leased.
The above information is not intended to replace advice from legal and taxation professionals.