Law & Regulation.

KEY TAKEAWAYS:

• Investing in a Real Estate in Bali does not necessarily require a specific visa.
• Navigating Indonesian visa regulations and complying with local laws can be challenging, but with the right legal assistance, it is entirely achievable.

The Visa System for Investors in Bali

Bali, Indonesia offers a range of visa options tailored to investors interested in entering the real estate market. Understanding these visas is crucial for a seamless investment experience.

Business Visa

Purpose: For initial visits to explore investment opportunities.

Details:

• Multiple Entries: Allows multiple entries.
• Duration: Permits a stay of up to 60 days per visit.
• Extensions: Possible under certain conditions.
• Ideal Use: Conducting preliminary business meetings, market research, and negotiations.

Investor Visa

Purpose: Designed specifically for foreign investors planning to invest and manage their business in Indonesia.

Benefits:

• Multiple Entries: Allows multiple entries during the visa validity.
• Extended Stay: Granted for an initial period of one or two years, with the possibility of renewal.
• Family Inclusion: Immediate family members can be included under the investor’s visa.

Limited Stay Permit (KITAS)

Purpose: For long-term investment and management activities.

Details:

• Validity: One year, renewable annually.
• Stability: Provides a more stable residency option for investors and their families.

Permanent Stay Permit (KITAP)

Purpose: For investors seeking long-term residency and stability in Indonesia.

Eligibility: Investors who have held a KITAS for a certain period.

Details:

• Validity: Five years, renewable indefinitely.
• Ideal Use: Long-term residence

KEY TAKEAWAYS:

• While the tax landscape in Bali may seem complicated, it is entirely manageable with the right guidance.
• Freehold property transactions involve a 2.5% PPH tax for sellers and a 5% BPHTB tax for buyers, while leasehold properties have a 20% lease tax for non-residents and a 10% flat tax for KITAS holders.

Taxes and Fees Involved

Understanding the taxes and fees associated with property transactions is essential to avoid unexpected costs.

• Freehold Properties:

  • Sellers are responsible for a 2.5% PPH tax.
  • Buyers must cover a 5% BPHTB tax.
  • Annual property tax (PBB) ranges from 0.1% to 0.2% based on government valuation.

• Leasehold Properties:

  • Non-resident lessors pay a 20% lease tax.
  • KITAS holders pay a flat 10% tax.

Additional expenses include notary fees (typically 1-2% of transaction value) and legal costs for documentation.

Optimizing Tax Exposure

Establishing a PT PMA (Perseroan Terbatas Penanaman Modal Asing) not only aids in acquiring leasehold or HGB titles but also helps optimize tax exposure. Key features of a PT PMA include:

Minimum of two shareholders.

• Allowance for fully foreign-owned enterprises in real estate.
• Requirement of a director and a commissioner.

A PT PMA can enhance your return on investment (ROI) and secure your property.

Key Takeaways:

• Understanding property ownership in Bali can be complex, but with the right legal guidance, navigating these intricacies becomes manageable and achievable.
• Foreign investors can access different property titles, such as leasehold, Hak Pakai (right to use), and HGB (right to build). Each offers unique benefits and limitations that must be considered.

Overview of Property Ownership in Bali

Navigating property ownership in Bali can be complex, but understanding the various opportunities available is essential for prospective buyers.

Foreign investors have access to several types of property titles, such as leasehold, Hak Pakai (right to use), and HGB (right to build). Each type offers unique benefits and limitations.

In contrast, only Indonesian citizens can own land under a Hak Milik title. It is crucial for foreign buyers to understand these distinctions to make informed property investment decisions.

Leasehold Properties for Foreigners

Leasehold properties offer foreigners a stable investment option. Both individuals and companies can lease property, with the seller referred to as the Lessor and the buyer as the Lessee.

A leasehold can have an extensive duration, as evidenced by a court in Jakarta recognizing a 100-year leasehold. Typically, buyers seek leases lasting 25 to 30 years, although shorter or longer durations can be negotiated. These agreements can be formalized either in front of a notary or privately between the two parties, as long as they adhere to Indonesian regulations.

It’s important to have a leasehold contract reviewed by a legal professional to ensure all clauses protect the buyer’s rights. Under a leasehold, the buyer does not gain ownership; the Lessor retains responsibility for land and building taxes. Ensuring that contract clauses cannot be used to cancel the agreement is essential.

Hak Pakai: Right of Use for Foreigners

The Hak Pakai (right of use) title allows foreign nationals to own property in Bali if they hold a KITAS or KITAP. However, this title applies only to properties with existing buildings; bare land cannot be sold to foreigners under Hak Pakai. The property must also meet a minimum value requirement, which varies by province.

Hak Pakai is an ideal option for those seeking to buy an apartment as a second home under a Second Home visa. Initially granted for 30 years, the tenure of Hak Pakai can be extended by an additional 20 and 30 years.

HGB Title for Commercial Use

The HGB (Hak Guna Bangunan) title is the highest title available to foreigners. A foreign investment company (PT PMA) can purchase freehold property under this title. Unlike leaseholds, the company becomes the owner and assumes responsibilities, such as land and building taxes.

The purchase is formalized through a Sales and Purchase agreement. The company has the right to resell the property, upgrade the land title to Hak Milik, and transfer the title. The land office updates the land title with the company’s name, removing the previous owner’s name, and the company can even apply for a mortgage.

Initially, HGB titles are granted for 30 years, with the option of extensions for 20 or 30 years each, totaling up to 80 years. These titles are transferrable through sales or inheritance.