Can foreigners own land and property in Bali?

The straight answer to this question has been in the past a clear NO. Up to now foreigners cannot OWN freehold land for sale in Bali i.e. having their name on the official land title. These laws are changing, but until now (Year 2010) it has not yet been clearly defined by law WHICH foreigners (permanent residents, temporary residents with working or retirement visa, certain categories of visitors, etc) will qualify.


Freehold

   1. Bali Right of Ownership (Hak Milik)

Bali Right of Ownership is the most comprehensive and complete form of individual rights over land for sale in Bali. This refers to absolute ownership of Bali land for sale and corresponds to a fee simple or freehold title in common law jurisdictions. There is no time limit, and the holder has the right to use the Bali land sold, including the earth underneath and the water and air above.

This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. (Unless the foreign investor is married to an Indonesian citizen, providing that a Pre-Nuptial agreement is entered into prior to the marriage being registered, the Indonesian spouse may hold Hak Milik land title). It can be sold, transferred, bequeathed, and  mortgaged.

A solution for foreign freehold ownership in Bali is using a Balinese nominee
Di Bali Tip: This is the most used (and unfortunately for the unwary, misused) option; the use of a Bali name holder for your property, with whom you make contracts. These contracts give you the right to use the Bali land sold to you. We cannot stress enough that these contracts should be checked and double checked. No matter how friendly the people are that offer their help, ask advice from a well known legal company in Bali who are familiar with selling land in Bali.


Using a Nominee in Bali

   1. A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the Bali land.
   2. A Right of Use agreement: allows the foreigner to use the Bali land.
   3. A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land in Bali.
   4. Power of Attorney in Bali: The nominee signs an irrevocable Power of Attorney giving the foreigner the complete authority to sell, mortgage, lease or otherwise deal in the land.


There are documents needed:

That the foreigner gives money to the Bali name holder to buy land and property and the Balinese gives this land and property to the foreigner to use it, of his own free will. The document also describes that the Bali name holder gives the foreigner permission to sell, rent or rebuild the Bali house or property. It states that all of the property costs (electricity, water and taxes) have to be paid by the foreigner. The official Hak Milik  will be in the foreigner;s possession. Only with this it is possible to sell the Balinese land.

The selling of the Bali property is granted to the foreigner. The name holder gives his explicit permission to do so.

The name holder gives permission to rent out the Bali land or property. The fourth document commits the name holder to co-operate, if the time ever comes that foreigners can own land and property in Bali, in making the foreigner the new name holder on the 'Hak Milik'.

Choosing the right Bali Partner to "own" your property or land is of the utmost importance. Here at Di Bali we will advise you on how to choose the right Bali partner and make your land sale without confusion and stress.


Fees

Notary: 1 to 1.5% of the value of freehold (Right of Ownership title) transaction paid by the buyer
Vendor Tax and Purchaser Tax: Both the seller and buyer pay 5% tax on the value of land sold and property sales based on Government valuation that can be seen on the last land and building tax invoice. The valuation by Government is extremely below the (real) market price.
Mortgage Certificate: 1% of value of mortgage.
Leasehold transaction is 1% of the real purchase price.


Leasehold

1. Bali Right to Rent or Leasehold (Hak Sewa)

This is the right to use Bali land owned by another private party (the lessor) for building purposes. The right cannot be registered at the Bali land sales office and therefore does not exist in certificate form.

This right may be held by a foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia. It cannot be mortgaged. Such a contract cannot be longer than 25 years but through various renewal clauses, the lease can be put in place for periods of time which are adequate for the needs of the investors. In this vehicle, the land title remains with the Indonesian owner of the land.


2. Bali Right of Use on Land (Hak Pakai)

Currently it is easy for foreigners in Bali to obtain the Right of Use. Property Rights of Foreigners UU 5/1960 only allows foreigners to obtain Right of Use or Right of Building Lease on land in Bali. However, UU 5/1960 only provides very general information on how to obtain either of these rights, the maximum time period, or the legal assurances provided. As a result, many foreigners in Bali  are not willing to engage in such transactions because they do not know the regulations or feel insecure with the regulations.

This is the right to use Balinese state-owned or other land for sale by public or private persons or entities for a definite period or occasionally for an indefinite period. This land right cannot be sold, exchanged or transferred unless explicitly provided in its grant or agreement.
This right may be held by an Indonesian individual, certain foreign individuals or a foreign legal entity with a representative office in Indonesia.

Renewal or extension of rights on expiry of the initial term is via an application to the National Land Agency and is subject to payment of a fee. An application must be submitted one year before expiry of the term. Although the law is silent in regard to the period after the expiry of the extended term/s, the consensus is that a Bali land right can be extended if there has been no infringement of the conditions attached to its usage.


3. Bali Right of Building

 Right of Building is a right over Bali land sold with which the holder may erect and possess buildings for a certain period of time not to exceed thirty years (can be extended for another twenty years). When the extension period expires, Right of Building can be renewed. Right of Building may only be owned by Indonesian citizens and companies established under Indonesian law and domiciled in Indonesia.


Using a PMA in Bali

The most significant change in Indonesian investment law came in 1997 when the government introduced the PMA or Foreign Investment Company. This allows foreign investors to set up a company in Indonesia without having Indonesian partners. The PMA can be 100% owned by a 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.

The process takes approximately 3 to 4 months and once it is completed; the company can apply for work permits for the foreign directors.

Pipil is land owned by Balinese families by inheritance which never has been formally registered with the Land Registration office. Before selling this type of land it has to registered. This takes usually 4 to 6 months.


Taxes payable on land

Handy Di Bali Tip: When land is sold in Bali there is tax to be paid by both the selling and the buying party. This is 5% for each of the total amount on the Bali land sales contract. Please note that the amount on the Bali land sales contract can be different from the actual price agreed upon. Project developers usually include all in their pricing schemes, but when negotiating please ask how Bali sales tax will be handled.

• Property Sales Tax in Bali is 5% for each party (buyer and seller)
• VAT Sales Tax: VAT on a sale is 10%
• Luxury Sales Tax is 20% tax on the sale of landed houses with a building size of 400m2 or more or an installed electricity capacity above 6.600 watt.