Investing in real estate in Indonesia and more precisely in Bali is 100% possible without the need of a nominee as you may have heard too often and can prove a very attractive operation.
The leasehold consists in renting a plot of land for more or less 25 years.
At the end of this duration, the land goes back to its owner including what is built on it without any financial compensation for the tenant.
Of course, it is possible to envisage an extension clause of the leasehold , nevertheless the owner is under obligation to grant it.
If the owner accepts this extension, the leasehold will be assessed according to the market price at the time of its renewal. For example, a plot of land which cost 50 000 euros at the time of the signing of the leasehold may cost twice or three times as much 25 years later.
If it is a financial investment, it is important to thoroughly assess in advance the total cost of the project and to take into account the construction time so that the operation remains profitable.
The leasehold is open to any foreigner.
The freehold corresponds to full ownership which means that the buyer holds all the rights on his land.
Yet, full ownership is not open to a foreign natural person. The only means to acquire the full property is by way of either a legal person or a PT PMA company which I describe in another paragraph.
The cost of a freehold land is much higher than a leasehold one; this type of acquisition allows a greater return on investment for a longer period of time and free of the countdown that starts right after signing a leasehold.
Once you are the owner, you may also offer for example a 25 year leasehold for your land or your house hence providing an interesting added value.
Each of these operations has its advantages and drawbacks so getting the information beforehand is very important to make the right choice and best secure one’s investment.
Starting or setting up a company in Indonesia cannot be done in your personal name and must necessarily be done through a company whether it be Indonesian or a foreign one with the creation of a representative office or simply an office.
The Indonesian law only allows economic or commercial activity through one kind of company called the PT PMA (Perseroan Terbatas Penanaman Modal Asing) which is similar to the French SARL ( or LLC).
A company is considered held by foreign capital even if the percentage of the shares held by the foreigner is 1%.
The PT PMA does not follow the same regulations as the classic Indonesian companies and is thus the subject of some restrictions; nevertheless lots of activities are still possible which accounts for the numerous foreign investments in Indonesia.
It must be favored as soon as you are considering developing an activity since it legally allows you to hire staff, grant work visas or take advantage of the local taxation which might turn out to be interesting depending on the activity and the turnover.
The PT PMA is subjected to two main legal obligations.
First, its share capital cannot be inferior or equal to 20 million IDR which is roughly the equivalent of 1,2 million EUROS or USD 1,295 million. Our local lawyers are specialized in the creation of PT PMA and will be ready to answer your questions especially regarding capital release.
Secondly, it must have at least two partners: a director and a commissioner who can be either natural or legal persons.
In order to protect some local and economic interests, the PT PMA is not open to all activities unlike the companies which are 100% Indonesian.
The authorized activities are listed in a document called KBLI: you will be advised about the choice to be made according to the considered activity.
Obviously the activities around real estate, catering, investment consulting or eventing and others are open to foreigners.
Finally you must bear in mind that some activities are open to PT PMA whose share capital is partly held by Indonesians whereas they can’t be open to PT PMA if 100% of the share capital is foreign.
Opening a representative office in Indonesia can turn out to be a very interesting option for the foreign companies which would later consider settling their activity.
Unlike for a PT PMA, there is no mandatory share capital since the representative office does not have the legal Indonesian person. It is by no means a subsidiary.
Hence the representative office cannot generate income or issue an invoice. The latter must necessarily be issued by the parent company.
The KPPA migas which applies to oil and gas foreign companies.