Kalyana Bay

Buying land and villas in Bali can be a complex foreign investment so it's essential that you seek independent advice and impartial legal counsel prior to purchase. An accounting specialist will also be able to educate you on the taxes involved in buying and owning a property abroad..

Only Indonesian nationals may own freehold land in their own name (indeed even Indonesian companies may not own freehold land), but there are several tried and trusted means by which you can acquire and control property in Bali. In the case of Kalyana Bay property, the Hak Milik title would be obtained.

'Hak Milik'

To 'own' land in Indonesia as freehold you would need an Indonesian nominee to own the Hak Milik title, which is attractive to investors because it is directly linked to the freehold title and gives the benefit of an asset that can capitally appreciate.

A nominee should be either someone you have a solid ongoing relationship with or a 'professional nominee' sought through your Notary. Several matters should be addressed within the Nominee Agreement:

• Nominee's annual fee
• 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

The next consideration is the type of security that you wish to use to note your interest in the property.

Hak Pakai atas Hak Milik – "Right of use over freehold"

A Hak Pakai, or right of use, is a mechanism specifically designed by the Indonesian government to allow foreign ownership of land. A Hak Pakai is a certificate that is granted by the Indonesian Land Office, and operates as an interest that 'floats above', and is recorded as an encumbrance on, the Hak Milik title.

This obviously gives a much more secure interest in the land, but a possible downside to this ownership option is that the parties may have ongoing two-tiered tax liabilities, both in relation to the Hak Milik title and the Hak Pakai title. Taxes for the transaction granting the Hak Pakai will be assessed on the government assessed value of the freehold property ("NJOP").