Buying a Property in Bali as a Foreigner

Buying a Property in Bali as a Foreigner

Investing in property in Bali is a great way to diversify your portfolio. Bali is a popular tourist destination that offers various real estate options like villas, apartments, and land. The tourism industry in Bali is strong, and it attracts millions of tourists each year due to its beautiful beaches, rich culture, and stunning natural landscapes. This creates a high demand for accommodation and can provide property investors with a steady stream of rental income.

Bali’s property market is also advantageous because of its lower cost compared to other popular destinations. Bali’s affordable options make it an ideal location for investors who may not have a large capital to invest in more expensive locations.

In addition, the government in Bali has implemented policies aimed at attracting foreign investment, which has resulted in increased interest from foreign investors. Bali’s property market has seen a growing number of property developments, especially in the luxury segment.

What you need to know before buying a property in Bali

A foreigner cannot directly own land in Indonesia, but they can own a building on land that they lease from the government or a local owner. There are generally 2 ways to acquire this:

Freehold ownership

also known as hak milik, is the most common form of property ownership in Indonesia. It grants the owner full ownership rights to the property, including the ability to sell, lease, or transfer the property. Freehold properties can be held by both Indonesian citizens and foreigners, with the latter being able to own the property through a local nominee or a local company.

One of the main advantages of freehold ownership is the ability to transfer or sell the property at any time. This makes it a good option for those who plan on living in the property for an extended period or for those who plan on renting out the property as an investment.

Leasehold ownership

also known as hak sewa, grants the owner the right to use and occupy a property for a specific period of time, usually 20 or 30 years. The property remains the property of the government or the original landowner, and the lease can be renewed at the end of the lease period. Leasehold properties are commonly held by foreigners and are a popular option for those looking to buy property in tourist areas such as Bali.

Leasehold ownership may be a better option for those who plan on using the property as a holiday home or for those who want to avoid the responsibilities and costs associated with full property ownership. However, one of the disadvantage of leasehold ownership is that the property can’t be transferred or sold during the lease period, and the lease is not inheritable. Additionally, the leasehold property owner is responsible for paying property taxes, maintenance, and other costs associated with the property.

Do I need to register a PT PMA ?

No, it is not necessary for foreigners to register a PT PMA (a foreign-owned limited liability company) to acquire a property in Indonesia. However, it is one of the safest ways that a foreigner can own property in Indonesia, as PT PMA can own land and property through a local nominee or a local company.

As a foreign national, you cannot directly own land in Indonesia, but you can own a building on land that you lease from the government or a local owner. You can do this by obtaining a Hak Guna Bangunan (HGB) or Right to Build and Own. This type of ownership allows you to construct and own a building on a piece of land, but not the land itself.

PMA (Penanaman Modal Asing)

PMA stands for “Penanaman Modal Asing” in Indonesian, which translates to “Foreign Capital Investment” in English. It refers to a company that is fully owned by foreign investors and operates in Indonesia.

PMA companies are established in Indonesia to conduct business activities and are governed by the Indonesian laws and regulations for foreign capital investment companies. These companies are established under the Indonesian law No. 25/2007 on Investment, and must be registered with the Indonesian Investment Coordinating Board (BKPM) for approval.

Hak Guna Bangunan (HGB)

Hak Guna Bangunan (HGB) is a form of land ownership in Indonesia that allows the holder to construct and own a building on a piece of land, but not the land itself. It is granted by the government for a period of 25 years and it is renewable for another 25 years. It’s a popular option for foreigners looking to buy property in Indonesia, as it allows them to own a building on land that they lease from the government.

It’s important to note that HGB holder must pay property taxes and other costs associated with the building and maintenance of the property, and they can’t transfer or sell the property during the lease period.

Things you need to know if you want to register a PT PMA

The requirements for establishing a PT PMA in Indonesia are governed by the Peraturan Badan Koordinasi Penanaman Modal Republik Indonesia Nomor 5 Tahun 2019.

Article 6 paragraph (3) of this regulation states that for the establishment of a PT PMA, foreign investors must meet the minimum capital requirements for foreign investment. Currently, the minimum requirement is IDR 10 billion or the equivalent value in US dollars (+/- USD 700,000) of paid-up capital, which generally needs to be set at 25% of the minimum capital requirement (i.e., IDR 2.5 billion or +/- USD 175,000).

The regulation also specifies that at least two shareholders, one of whom must be a foreign individual or entity, are required for the establishment of a PT PMA. The director must be based in Indonesia, and the company must comply with the activities allowed under the Indonesia Investment Negative List.