Indonesian Property Ownership Options for Foreigners

[CaturMuka]

In Bali, everything is SO EASY . . .

That's not a phrase you hear too often. Good luck with everything.

 

[Annet]

Hahaha reeeealllly?
Thanks!

 

[daminou]

Hello everybody,
I'm looking since days for information and just found this forum and thread, what a relief...
I'm married with indonesian women without any contract, we want to settle in Bali with our 1year old daughter. Can someone confirm to me the most legal process to do so if I understand correctly?

• post nuptial agreement before buying so she can get hak milik
• she does hak pakai to me for 30years
• loan in the post nup ? That's the part I don't understand. If I do a loan to her to buy the land, how to put it in the post nup that was written before?

Other question is if I give her the money to buy the land, do I have to give money again for hak pakai ? Or can it be just a written value and we just pay tax ?
Can you have building permit with hak pakai ?
Thanks a million in advance, our notary is not much helpful with this...

 

[jstar]

• she does hak pakai to me for 30years

Not really. Leasehold is available for all foreigners* so in fact she wouldn't have to be involved. For Indonesian citizens it is possible to convert Hak Pakai to Hak Milik but there are restrictions.

You assume she will have to buy the land first, that’s possible but not necessary. The Hak Pakai can be extended and sold** btw so it can be a valid option. But most Indonesians want to own the land so Hak Milik is a holy grail. Reading between the lines that’s the path you’re on.

• loan in the post nup

It’s more; personal loan after the postnup. There are quite some consequences. Then we’re talking tax (reporting) etc.


* if they live in the country (ITAS)
** not always possible, depending on the contract

NB: for a building permit there’s always a written approval necessary from the owner of the land.

 

[daminou]

Not really. Leasehold is available for all foreigners* so in fact she wouldn't have to be involved. For Indonesian citizens it is possible to convert Hak Pakai to Hak Milik but there are restrictions.

You assume she will have to buy the land first, that’s possible but not necessary. The Hak Pakai can be extended and sold** btw so it can be a valid option. But most Indonesians want to own the land so Hak Milik is a holy grail. Reading between the lines that’s the path you’re on.

It’s more; personal loan after the postnup. There are quite some consequences. Then we’re talking tax (reporting) etc.


* if they live in the country (ITAS)
** not always possible, depending on the contract

NB: for a building permit there’s always a written approval necessary from the owner of the land.

Thank you for your reply.
My concern of not doing hak pakai with her is to not be able to extend with another owner of the land... if she owns it's easier.... seems to be at least..

But the thing is, I'm paying the land... so will I have to pay it twice ? If she say she leasehold the land to me for a value, we pay the taxes but do I really have to send money ? If so can she send it back straight to me afterwards?

I know my questions are a bit silly but I couldn't find a clear answer even from my notary with all that montage.

The whole point of all of this is for our family to own our first roof and leave peacefully in full legality with everybody assets protected from divorce, death, denonciation or whatever

 

[Helpful Herbert]

You can't protect assets against divorce in this country. If you buy a property look on it as a divorce payment in advance. Hopefully you will never get divorced so it won't be relevant.

 

[daminou]

You can't protect assets against divorce in this country. If you buy a property look on it as a divorce payment in advance. Hopefully you will never get divorced so it won't be relevant.

Understood. You're right it shouldn't ever be relevant.

After some more checks I found other problem (for my situation) in that montage:

1. An Hak Pakai can't be used as collateral in mortgage (that was our plan to build)
2. The value of the House/Land should be minimum 5billions. (We will be far below)
3. Hak Pakai you need to have Kitas and it then change my tax residency which I'd like to avoid as income tax aren't cheap here and I'm more than 6months out of the country for work..

So here come to my mind another possibility.
We just registered our post nup contract today. So mow hypothetical plan would be :
1. Hak Milik in my wife name with my funds
2. Hak Sewa (leasehold) from my wife to me for 30yr (renewable) at a cheap price
3. Hak tanggungan for the bank to be able to build, and then when loan paid Hak taggungan to me


What your thought on this? What do you think of Hak Sewa ?

 

[fastpitch17]

Look at things a little differently. Wife buys property and is in her name. You lease property long term, property still in wife's name. Wife dies, she still owns property. Her family feel they should have that property. They kick you out. Not unheard of since you would find out very quickly the law is never on the side of a WNA. Get divorced and she can kick you out. That lease will mean nothing. Food for thought.

 

[daminou]

Look at things a little differently. Wife buys property and is in her name. You lease property long term, property still in wife's name. Wife dies, she still owns property. Her family feel they should have that property. They kick you out. Not unheard of since you would find out very quickly the law is never on the side of a WNA. Get divorced and she can kick you out. That lease will mean nothing. Food for thought.

That's exactly for those kind of answer that I post here. My notary isn't very helpful to answer and I'm wondering what a Hak Sewa worth... I thought it was valid even in case of change of owner...

 

[Samoerai]

My advice: just rent and keep everything flexible. Unless you really like to have headaches. Jstar mentioned the tax problems you will have when you give money to your wife to buy a house or when you buy the house and put it on your wife's name. Be very careful.

 

[daminou]

My advice: just rent and keep everything flexible. Unless you really like to have headaches. Jstar mentioned the tax problems you will have when you give money to your wife to buy a house or when you buy the house and put it on your wife's name. Be very careful.

I wish we could but rent rate have gone crazy here...
I don't like headaches for sure but if it can save us thousands...
I do appreciate the advise tho and you might be very right

 

[Samoerai]

I wish we could but rent rate have gone crazy here...
I don't like headaches for sure but if it can save us thousands...
I do appreciate the advise tho and you might be very right

If you really want to buy property, seek advice from other expats or tax consultants to avoid some problems.

 

[Shadrach]

My advice: just rent and keep everything flexible. Unless you really like to have headaches. Jstar mentioned the tax problems you will have when you give money to your wife to buy a house or when you buy the house and put it on your wife's name. Be very careful.

I agree about just renting. If anything major breaks, it's the owners responsibility to fix it. This is just a rabbit hole that gets deeper and deeper. If you are a foreigner, all the odds are against you. Ownership here is in an Indonesian's name, then on to their family.

 

[fastpitch17]

I wish we could but rent rate have gone crazy here...
I don't like headaches for sure but if it can save us thousands...
I do appreciate the advise tho and you might be very right

So, don't live in Bali. Too crowded and becoming wall to wall concrete. Lots of options all over the nation including ones which include oceans and mountains. Not sure what your income is or sources of but if rental cost are going up that much, building and buying cost will be going up to.

Maybe some of the Bali residents can chime in as to just how much the rents have risen.

 

[daminou]

I'm a seafarer, I've got steady and fair income, I just don't like the percentage the rent is taking from this income, percentage that literraly goes into the wind... I'd rather pay "for us"
To the question to live or not in Bali, I already do. My wife is balinese, my daughter is half balinese, I love this island and the life here... and crowd is avoidable when you know the place, nothing is perfect anyway. But I feel way more safer here than Palma in Spain or on the French riviera...

As an update. We just sign in front of notary a post nuptial agreement, for asset separation so she can hold a hak milik.
This agreement state that if she died 50% of her assets goes to me, 50% to our daughter. Being foreigner I guess I will then have 1 year to sell it all. Its already a nice protection no ?

Regarding the Hak Sewa, leasehold. Ok my name is not registered at the land office, but it has a real legal value, im suprised to hear its not safe as big percentage of foreigner's investment here are under this structure. I'm open to hear the weakness of the Hak Sewa

 

[Helpful Herbert]

I don't think you should rely on the law to help you. The law doesn't work here like it does in the West. In the case of divorce you probably won't get anything back, other than what you can negotiate (from a very weak negotiating position). You can look at it positively that ultimately your daughter would receive the property.
In case of her death you need to be on good terms with her family. You can waste a lot of money paying lawyers and consultants, but better to focus your money and energy on keeping everyone in the family happy. A pre-nup (or post-nup) is the only legal thing you absolutely have to do. For the rest it is a lot of work for little effect. Not to mention that for Indonesians seeing their boyfriend going to great legal lengths to protect his property from her doesn't really make her feel very valued in the relationship.

 

[Samoerai]

To avoid tax problems, you better put the property on your kid's name.

 

[daminou]

I don't think you should rely on the law to help you. The law doesn't work here like it does in the West. In the case of divorce you probably won't get anything back, other than what you can negotiate (from a very weak negotiating position). You can look at it positively that ultimately your daughter would receive the property.
In case of her death you need to be on good terms with her family. You can waste a lot of money paying lawyers and consultants, but better to focus your money and energy on keeping everyone in the family happy. A pre-nup (or post-nup) is the only legal thing you absolutely have to do. For the rest it is a lot of work for little effect. Not to mention that for Indonesians seeing their boyfriend going to great legal lengths to protect his property from her doesn't really make her feel very valued in the relationship.

Thank you very much for your wise words and yes I do everything to protect all parts, her, our daughter and mine, trying to be fair for all.

To avoid tax problems, you better put the property on your kid's name.

This is not possible in indonesia with double nationality to own anything. But I don't see a big tax problem regarding property in indonesia what am I missing ?

 

[Samoerai]

But I don't see a big tax problem regarding property in indonesia what am I missing ?

With a prenup / postnup you and your wife seperate your assets, right? So, your wife is practically a stranger from tax law point of view. Giving money to your wife, means she has to pay income tax on that amount. The more you give, the more she has to pay to 'bapak pajak'. Your wife and you are in a horizontal relationship. You can give money to your child, vertikal relationship, without income tax problems like this.

 

[marcus]

... I just don't like the percentage the rent is taking from this income, percentage that literraly goes into the wind... I'd rather pay "for us"

To me renting is financially equivalent to buying .
So for example , if you buy a Rp10 Billion house , I could prefer to invest this Rp10 Billion and use the investment profit to rent a house .
Lets say , investing in Indonesian Government bond at 6%/year , 10% income tax and 2.5% inflation , I could get ~Rp290 million/year net interest for renting .
Probably the property price will rise in the future , but renting gives me more freedom to move if I don't like the house , the neighborhood , or the city .

... We just sign in front of notary a post nuptial agreement, for asset separation so she can hold a hak milik.

This agreement state that if she died 50% of her assets goes to me, 50% to our daughter. Being foreigner I guess I will then have 1 year to sell it all. Its already a nice protection no ?

I understand that foreigners can only inherit Indonesian land if there is no Will .

(non-official translation)
Article 21 of Land Law (UU no.5 - 1960)
(3) Foreigners who after the enactment of this Law do obtain property by inheritance without a will or a mixture of property through marriage,...