House of Bali

INTRODUCTION

Under Indonesian law foreigners are not permitted to have property title in Indonesia. However, foreign individuals can legally acquire property in Indonesia and enjoy full beneficial rights. House of Bali always recommends to clients that they should secure the best legal advice when securing property in Bali. This is a summary of the various alternatives.

1) Enter into a legal arrangement with an Indonesian nominee, either an individual or PT company, whereby he/she/corporation holds title to the property. Simultaneously, complete a power of attorney, handing over full rights from the Indonesian entity to the foreign investor.

2) Make a leasehold investment in the property, up to 25 years. Partnerships with Indonesian citizens are not required in leasehold transactions. This method does offer complete protection to the foreigner during the term of the lease, however, once the lease term has expired the agreement can be extended or the property reverts to the Owner.

3) Form a foreign investment company (PMA). Here the foreigner can own the company 100% and the title of the property will be in the company name. However, title in this case could only last for 20 or 30 years as PMA companies have to re-apply to the Indonesian Government to extend their license.

NOMINEE POWER OF ATTORNEY

This is done by providing the investor with an Indonesian nominee, who has title to the property but who simultaneously enters into a legal power of attorney with the foreigner. The power of attorney gives the investor beneficial rights on the property and waives all rights of the nominee. The investor is then free to build on the land, sell or lease the property and transfer the title to next of kin, the nominee will receive a nominal fee for his responsibilities as the title holder.

FOREIGN INVESTMENT COMPANY (PMA)

The most significant change in Indonesian investment law came in 1997 when the Government introduced the 'PMA' (Penanaman Modal Asing or Foreign Investment Company Programme). This allows foreign investors to set up a company in Indonesia, without having to have Indonesian partners; the PMA can be 100% owned by the foreign investor. PMA companies are allowed to own the title of the property for a period of 25 years, when the title has to be renewed by the Government. To set up a PMA company you will be required to:

• Submit a detailed business plan.
• Operate in a business environment that adds value to Indonesia in terms of foreign skills, employment and environmental benefit.
• Make an appropriate cash deposit in an Indonesian based bank. (The amount varies and is calculated from the capital employed in the business).
• Show the property investment as an asset of the company.

The process takes approximately 3 to 4 months and once completed the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up is between 30 to 40 million Indonesian Rupiah.

BUYING THE PROPERTY

Land parcels for sale in Bali fall into one of two categories:

• Pipil : Land that has been passed down through a local Balinese family but has never been formally registered with the Land Registry Office.
• Certificate : Land which has already been registered with the Land Registry Office. Only land which has a certificate can be sold.

The conversion of 'Pipil' land into certified status is handled by House of Bali and normally takes 4-6 months. Once your chosen land has a certificate, a transaction can be completed within 1 day, however, with legal due diligence this process normally takes 1-2 weeks

All land purchases in Indonesia must by witnessed in the presence of an officially appointed 'Notaris' or lawyer. The standard contracts are written in Bahasa Indonesia language, however, House of Bali can arrange for translations upon request.

Simplified, buying land in Bali can be illustrated with the following steps:

Congratulations! You have now acquired property on the Island of the Gods