A. TITLE

There are a number of different types of title in Indonesia:

Hak Milik (Freehold) is the type of title that can only be held by an Indonesian citizen.

Hak Pakai (essentially leasehold title) and other forms of title can be held by a P.T. or PMA Company (Foreign Investment Company).

A non-Indonesian citizen cannot own land in Indonesia. However a foreigner can acquire a leasehold title to a building - almost the same as a strata title except that the title lasts only for 25 years with an extension of 30 years for a maximum of 55 years and then reverts to the original owner (lessor).

B. SOLUTION

There are 2 ways for foreigners to own the land in Indonesia: 1. Using the Nominee

The Nominee will sign four documents with the foreigner as follow:

A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.

A Right of Use agreement: allows the foreigner to use the land.

A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.

Power of Attorney: The nominee signs an irrevocable Power of Attorney giving the foreigner the complete authority sell, mortgage, lease or otherwise deal in the land.

2. Using the 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). 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 25 years and have to be renewed by the government.

To set up a PMA, you will be required to:

Submit the 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 its 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 the PMA is between IDR 30 to 40 Million or equivalent with USD 4,500.

C. FEES

Notary: 1% - 1.5% of the value of the transaction.

Vendor Tax & Purchaser Tax: Both the vendor and purchaser pay 5% tax on the value of land and property sales.

Mortgage Certificate: 2% of value of mortgage.

NOMINEE

Foreigners purchasing land in Bali, should protect their interests by putting the following documentation in place:

Please consult with the Notary in regard to the Hak Pakai option. Although this option is similar to a long term lease, it may suit your needs better than the use of a nominee. If using a nominee, the following documents should signed with your nominee, prior to the purchase:

Mortgage Agreement - Cost: 1% mortgage value for Notary; 1% of total mortgage value for BPN land affairs office.

Power of Attorney - granting exclusive rights to Mortgager to release the Mortgage.

Financial Loan Agreement.

Power of Attorney for all rights to the land.

Statement Letter - outlining proof of payment for the property.

Statement of Indemnity (for nominee).

Power of Attorney for IMB - authority for Building Permit.

Statement Letter - No second mortgage.

Lease Agreement - granting the purchaser 25 years lease plus an automatic extension of 25 years (added security) - Cost: 1% of lease value.