Investment Types in Indonesia

If you are amongst many investors that are falling in love with Indonesia and plan to add your property investments portfolio on this magical archipelago, maybe you need to understand more about freehold and leasehold properties law in Indonesia.


Leasehold VS Freehold / HGB

On this table below you will find the important comparison between Leasehold and Freehold (For Indonesians) or HGB (For International Investor)

Hak Guna Bangunan VS Hak Pakai


Can I buy a freehold land /property?

The safest way for a foreign national to invest in property in Bali is to do it through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) certificate.
A PT PMA is a foreign limited liability company in Indonesia. With a PT PMA, you will have the right to acquire the Right to Build (Hak Guna Bangunan/ HGB) and Right to Use (Hak Pakai/HP) certificates.

What happens after the lease expires?

Essentially both licenses make you the owner of the property. Your family members can inherit them and you can sell the property. If the buyer is an Indonesian citizen they are also able to convert the certificate to a Hak Milik (right to own).
If you wish to hold the property after the 80 years (which would potentially be in the 22nd century by then), you can acquire a new certificate once the old one expires.

Are leasehold land/properties also available freehold?

No. Freehold has to offered by the land owner, in Bali for example land owners prefer to keep the freehold as leasehold is more common and historically the only option available for foreigners.

Can I sell my leasehold?

Yes. At any point you can. You will transfer your lease to the new Leaseholder.

What happens when I own a PTPMA with my australian tax?

To set up his PMA he will need to send capital from Australia to Indonesia (the villa purchase price) recorded as a loan from shareholders to build up the capital company in Indonesia.
Then, the dividend paid back to him from the Indonesian company will not be taxed as it will be registered as loan pay back to the shareholder. There is a small tax paid on the loan interest which is minimal.
After the loan is fully paid back, he then will have to pay dividend tax which I think is 15% between Australia and Indonesia.

Can I rent my property while I am abroad?

Since the purpose of Hak Pakai is acquiring property for personal use, a person can hold only one Hak Pakai (i.e only one property).
Note that you can hold Hak Pakai only if the land already has a building on it and there are limitations for operating a property with a Right to Use (Hak Pakai) certificate as a business. There is also minimum value to the property and it must be located in a touristic, residential, or trading area as you cannot acquire land in Bali in agricultural or greenbelt zones. 

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