Land ownership and registration certificate

nardo

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Could anyone please proffer information regarding the rights and mechanisms whereby a WNA with kitap can own land jointly with a WNI spouse.
Can a WNA have a name on the certificate tanah with the WNI? Has anyone done this?
 

dafluff

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Could anyone please proffer information regarding the rights and mechanisms whereby a WNA with kitap can own land jointly with a WNI spouse.

A WNA can not own land (freehold) in Indonesia. If a mixed couple does not have an asset separation agreement (either pre or post-nuptials), the WNI spouse is also unable to purchase land because Indonesian marriage law recognizes common property, and as already stated, WNA can not own freehold land.

Can a WNA have a name on the certificate tanah with the WNI? Has anyone done this?

No. A Notary/Land Registrar (PPAT) that understands the law will not allow this. In the past, this has happened due to ignorance on the PPAT's part, and when it does it will cause problems when the property is to be sold. The remedy is usually a court hearing and a post-nuptial agreement, in which the WNA spouse loses all rights to the property.

When a person sells a property purchased while they were married, they either need to show: 2 WNI KTPs (husband, wife), a WNI KTP and a separation of asset agreement, or a WNI KTP and death/divorce certificate.
 

nardo

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Thank you. What would the post nup have to state by make an it legal for the WNI spouse to own land? Please...
 

dafluff

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Thank you. What would the post nup have to state by make an it legal for the WNI spouse to own land? Please...

For the post-nup to be legal you have to have a notary draft it, then register it with the marriage registrar (KUA for Muslim marriages, Catatan Sipil for everyone else). You should consult with the notary as to the specifics of your case. Also, make sure to understand any tax implications in the future that this may have: Indonesia does not recognize tax-free "gift-giving" between husband and wife. Either you have common assets, hence everything is owned jointly (so legally you can't gift something you already own), or separation of assets, where gifts may be considered income.
 

dafluff

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Can a company own land?

A company, Indonesian or PMA, may not own freehold land (Hak Milik). They can own Hak Guna Bangunan, with the caveat that for PMA the business is not created for the main purpose of owning the HGB.
 

nardo

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Thank you so much for your informed counsel dafluff. I guess there is no such thing as a trust in Indonesia and that even if there is, a trust can not own hak milik either. Is there any way a WNA or mixed couple can secure tenure in an investment or business that involves the holding of hak milik?
 

a-sha

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For the post-nup to be legal you have to have a notary draft it, then register it with the marriage registrar (KUA for Muslim marriages, Catatan Sipil for everyone else). You should consult with the notary as to the specifics of your case. Also, make sure to understand any tax implications in the future that this may have: Indonesia does not recognize tax-free "gift-giving" between husband and wife. Either you have common assets, hence everything is owned jointly (so legally you can't gift something you already own), or separation of assets, where gifts may be considered income.
I was wondering about the tax, you mention, when a WNA spouse buys a house and put the house on his wife's name (WNI). And they are married with a prenup. What tax implications are there to be expected?
 

dafluff

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I was wondering about the tax, you mention, when a WNA spouse buys a house and put the house on his wife's name (WNI). And they are married with a prenup. What tax implications are there to be expected?

The logic is as follows:
Indonesia only recognizes tax-free gift-giving to immediate, vertical family members (parent to child, child to parent). In a non-prenup marriage, there is no gift-giving, because as far as the tax office is concerned, everything is already jointly owned.

In situations where you have a separation of asset agreement, then the tax office considers you two separate financial entities. So giving a gift follows the rule as you would giving a gift to a stranger. If your wife files her taxes the year after she received a house, she could face questions as to how she now has a house, and if the answer is it was gifted by someone, not her parents or her children, then it could be considered income.
 

a-sha

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The logic is as follows:
Indonesia only recognizes tax-free gift-giving to immediate, vertical family members (parent to child, child to parent). In a non-prenup marriage, there is no gift-giving, because as far as the tax office is concerned, everything is already jointly owned.

In situations where you have a separation of asset agreement, then the tax office considers you two separate financial entities. So giving a gift follows the rule as you would giving a gift to a stranger. If your wife files her taxes the year after she received a house, she could face questions as to how she now has a house, and if the answer is it was gifted by someone, not her parents or her children, then it could be considered income.
Let's say the house is 2 miljard rupiah. Tax income rate is 30%, I read online. My wife has to pay income tax, 30% x 2 miljard = 600 juta? Every year? Is there not a different tax rule for property and is there a threshold for property?
 

Helpful Herbert

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No, that's not what he's saying. A new asset can be treated as an increase in income, and if so, income tax applies, income tax rates are tiered starting with a zero band then I think 5% 15% up to 30%.

IF your wife submits a tax return, and IF she includes this new asset on the tax return, then it is possible that someone in the tax office reviewing it may say that she should pay income tax on it as it represents an increase in income. (It is also possible that they would not check it or they would not raise any query about it. They do not check in detail every single tax return it is done on a sample basis).

You could, if you want, voluntarily declare this asset value as income and the tax rates mentioned above would apply. I remember during the tax amnesty time people were declaring assets on the tax forms and voluntarily paying a reduced rate.

I would be interested to know if anybody has been forced to pay tax on transfers from husband to wife before, or lost a legal action with the tax office on this issue. I have never heard of it happening and it just seems to be a bit unlikely but it would be interesting to know.
 

a-sha

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No, that's not what he's saying. A new asset can be treated as an increase in income, and if so, income tax applies, income tax rates are tiered starting with a zero band then I think 5% 15% up to 30%.

IF your wife submits a tax return, and IF she includes this new asset on the tax return, then it is possible that someone in the tax office reviewing it may say that she should pay income tax on it as it represents an increase in income. (It is also possible that they would not check it or they would not raise any query about it. They do not check in detail every single tax return it is done on a sample basis).

You could, if you want, voluntarily declare this asset value as income and the tax rates mentioned above would apply. I remember during the tax amnesty time people were declaring assets on the tax forms and voluntarily paying a reduced rate.

I would be interested to know if anybody has been forced to pay tax on transfers from husband to wife before, or lost a legal action with the tax office on this issue. I have never heard of it happening and it just seems to be a bit unlikely but it would be interesting to know.
Thanks for the explaination. If my wife declares the house of 2 miljard on the tax form, would that be considered as an increase of income of 2 miljard? If so, I just cannot believe a tax rate of 30 % x 2 miljard will be applied. I find that rather excessive.
 
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centurion

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Thanks for the explaination. If my wife declares the house of 2 miljard on the tax form, would that be considered as an increase of income of 2 miljard? If so, I just cannot believe a tax rate of 30 % x 2 miljard will be applied. I find that rather excessive.
Your wife can take a loan from you and pay for the house. In that case there will be no income tax at the beginning at least, but she will owe you the money. You can write off the loan little by little below the tax threshold.
 

a-sha

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Your wife can take a loan from you and pay for the house. In that case there will be no income tax at the beginning at least, but she will owe you the money. You can write off the loan little by little below the tax threshold.
With these crazy tax policies I can imagine people applying tricks just to avoid paying these absurd tax rates.
 

a-sha

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Your wife can take a loan from you and pay for the house. In that case there will be no income tax at the beginning at least, but she will owe you the money. You can write off the loan little by little below the tax threshold.

This trick sounds similar as a foreigner buying property through an "Indonesian representative". Is this still done and legally? In my case my wife and I need to set up a loan agreement, right? That's it? In practice there is no monhtly payment to me to proof that to the tax office?
 

centurion

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This trick sounds similar as a foreigner buying property through an "Indonesian representative". Is this still done and legally? In my case my wife and I need to set up a loan agreement, right? That's it? In practice there is no monhtly payment to me to proof that to the tax office?
It is not a trick if you gave money to your spouse to buy a house. The money can be either a gift or a loan.
If you give a loan it would be prudent to repay back some amount every year (installment can be yearly) so the tax office if an audit happens (which is very rare and unlikely, at least for now) does not reclassify the loan as a gift.

And the tax rates are not so crazy. In Europe and Canada, you can get a tax rate of more than 50% in some cases. Indonesia is somewhere in the middle.
 

a-sha

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Thanks Centurion. Do I have to go to a notary to make the loan agreement official? What would be an acceptable time scale and acceptable installment?

I also would be interested to know, like helpful herbert, about experiences of WNA and WNI in the same situation regarding paying or not paying tax for a house bought by WNA.
 

centurion

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Thanks Centurion. Do I have to go to a notary to make the loan agreement official? What would be an acceptable time scale and acceptable installment?

I also would be interested to know, like helpful herbert, about experiences of WNA and WNI in the same situation regarding paying or not paying tax for a house bought by WNA.
You can make a simple loan agreement over a duty stamp (materai), it has to be in Bahasa, and no need for a notary. The loan can be in USD, so the interest rate could be low (0.25-0.5%).
 

a-sha

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You can make a simple loan agreement over a duty stamp (materai), it has to be in Bahasa, and no need for a notary. The loan can be in USD, so the interest rate could be low (0.25-0.5%).
Actually, the house in Indonesia was bought with saved money, that is regarded as capital (not income) in the Netherlands.
With this saved money my wife and I bought the house in Indonesia in 2021 and we recently (2022) moved to Indonesia. The house is not yet transferred to my wife at the notary, but will be soon this year.

Because I receive pension from the Netherlands, we still have to file tax returns in the Netherlands. The house in Indonesia has been declared in the Dutch tax return 2021 and is classified as capital. Because there is a threshold for capital in the Netherlands, no tax is effectively paid on the house.

Is the house then still to be filed in the tax returns in Indonesia and will this house be taxed in Indonesia, in spite of the context of tax treaty between The Netherlands and Indonesia?

Or is it just adding all the income (+house) x 30% = tax credit in Indonesia minus the paid tax in The Netherlands?
 
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dafluff

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Actually, the house in Indonesia was bought with saved money, that is regarded as capital (not income) in the Netherlands.
With this saved money my wife and I bought the house in Indonesia and we recently moved to Indonesia.

Because I receive pension from the Netherlands, we still have to file tax returns in the Netherlands. The house in Indonesia has been declared in the Dutch tax return and is classified as capital. Because there is a threshold for capital in the Netherlands, no tax is effectively paid on the house.

Is the house then still to be taxed in Indonesia, in the context of tax treaty?

If your wife received the house (or money for the house), while she was not an Indonesian tax resident, then there is no tax due. When she becomes an Indonesian tax resident, and she files taxes for the first time, then you should include the house in the statements of assets.
 

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