Real Estate in Bali


Thinking about investment into Bali real estate market, purchasing land or villa in Bali?
Looking for a quite place for living with happiness and in harmony with surrounding world?
Place with favorable weather, warm ocean and beautiful nature? 


By Indonesian law a foreigner cannot own land in Indonesia.
If a foreigner chooses, it is possible to purchase real estate in Bali via nominee or rent it for many years.  

There are two main options for property ownership:
Leasehold (Hak Sewa) & Freehold (Hak Milik)

1. Leasehold

Leasehold can be an attractive option for those wishing to purchase a property for a specified period. You should be aware that a lease is only a temporary interest in the land. Once your lease term is up, the property – and any improvements you might have made to it – reverts to the owner of the underlying Hak Milik. The length of the lease is critical in terms of possessing a transferable asset that will appreciate with time and be attractive to anyone wishing to buy the lease if you decide to on-sell during the lease term.

A foreigner can acquire a leasehold title for 25 years with double extension of 30 years for a maximum of 85 years. A properly drafted lease agreement should contain provisions for renewal of the lease, the stage of the lease the renewal can be requested, and the price mechanism of the renewal. For example, the lease document should include whether you can opt to renew the lease at any time during the lease term, or whether this can only be done within a certain timeframe prior to the expiry of the initial term. The price of a rent increase for further terms is often linked to the price of a commodity such as rice or gold – if a mechanism for rent increase is not specified in the lease, you may face a crippling rent increase when the time comes to renew for a further term.

Leases in Indonesia, whilst often formal documents prepared by a Notary, are not registered with the Indonesian Land Office as an encumbrance on the Hak Milik title and are thus considered a private agreement between two individuals. There are however strict laws protecting the interests of a lessee in land.

Leasehold interests in property are often more suited to those looking for a ‘lifestyle’ choice – as the asset itself is a limited right to the land for a limited period, and is not guaranteed to appreciate with time. For example, a general rule of thumb is that to purchase a leasehold interest lasting 40 years will cost approximately 60% of the price of buying the freehold rights to the same property. As the term of the lease reduces throughout its course, the lease may become difficult to resell as potential buyers may be more interested in buying an asset with longer tenure.

2. Freehold

The reality of ‘owning’ land in Indonesia as freehold is that you need an Indonesian nominee to own the Hak Milik title. This type of interest in land is attractive to investors because it is linked directly to the freehold title and gives the benefit of an asset that can capitally appreciate. A nominee holder of the Hak Milik is someone that you are going to have an ongoing relationship with, so you should carefully consider the nominee used. It is essential not only for your comfort but for the security and effectiveness of your asset that the relationship is governed by a fair and detailed Nominee Agreement.

It is recommended that the following matters be fixed in the Nominee Agreement:

  • An annual fee payable to the Nominee
  • A percentage of the sale price payable to the Nominee if the land is on-sold
  • Legal and taxation indemnities in the Nominee’s favor – as the Nominee remains the taxation object, this is an essential part of the agreement
  • Obligations on the Nominee to cooperate in applications for licenses such as building approval, pondok wisata licensing for commercial rentals, and for leasing the property


There are obviously taxation implications for the transfer of interests in property, building on land, and ongoing land tax obligations. Brief summary of some of the taxes that you may likely be liable for upon taking an interest in property in Indonesia such as Income Tax, Value Added Tax (Pajak Pertambahan Nilai or “PPN”), Stamp Duty and Levies, and Land and Building Tax.

Taxes on Leasehold:

Non VAT-able leases in Indonesia are subject to PPH (Income Tax), which is charged at 10% of the total amount paid. On a 25 or even a 40 year lease, this can be quite a large sum. The tax is payable as an income tax, and is accordingly assessable on the income of the party receiving the money – the Lessor. Leases may also be subject to PPN if the Lessor is entity obliged to charge PPN. It is very important when preparing your lease documentation to ensure that, if the lease is not expressed as including an amount for PPH and PPN, then the obligation to pay any applicable taxes is clearly stated as belonging to the Lessor. Nominal stamp duty may be payable if the lease is prepared as a Notarial Deed.

Taxes on Transfer of Freehold:

Taxes on a transfer of Hak Milik are payable on the Tax Object Acquisition Value (“NJOP”) which is the higher of the amount paid for the property, and the NJOP, or pre-assessed government value of the land and any improvements on it. The tax rate is 8% of the NJOP and is incurred as 3% to the seller and 5% to the buyer. It is common for the Notary handling the transaction to retain certain amounts of the settlement proceeds, pending final assessment and payment of the taxes assessed on the transaction, to avoid the buyer being left after settlement with a tax liability higher that that anticipated, and contributed to by the seller. 

A potential purchaser should be aware that if Hak Milik land is purchased simultaneously with the grant of a Hak Pakai, tax will be payable as 10% of each transaction, both for the transfer of the Hak Milik and on the grant of the Hak Pakai, making the total tax payable for the transaction at least 18% of the value of the NJOP of the land. The Nominee will not likely pay the tax, leaving the seller to pay 3% of the value of the Hak Milik transfer in tax, and the buyer to pay 5% of the value of the Hak Milik transfer in tax, in addition to the 10% tax on the value of the grant of the Hak Pakai.

Land and Building Tax:

Taxes are also payable yearly as a proportion of the NJOP, and also on any buildings erected on land. In relation to taxes on buildings, tax is generally assessable at 10% of the total cost of building, if contractors are used. When entering into an agreement with a contractor to build, the agreement should clearly state which party is responsible for payment of the tax on the amounts paid pursuant to the contract.

This rate of tax may be reduced to 4% of the total cost of building, which will only be allowed in the case of “Self-Building”. Self-Building is very strictly interpreted by the tax office, and is only available where the person claiming the lower rate of tax can establish that they actually did build the property themselves, with proof such as logs and spreadsheets covering the daily costs accrued over the course of construction.

When purchasing a property with buildings already established on the land, you should ensure to obtain proof of payment of tax on the construction of the buildings. If a government assessor determines that tax has not been paid the liability rests with the current owner of the property – you – despite the fact that the property may have been on-sold any number of times since the buildings were constructed.

Taxes on Rentals:

Each property in order to be rented should have Rental Licence (Pondok Wisata) or hotel licence and registered with tax authorities. Rental proceeds is subject to taxation at 11% rate.

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