Leasehold or hak pakai: how a foreigner actually holds a Bali villa

Whatever the brochure says, a foreigner in Bali holds a villa in one of a few specific ways, each with its own term, its own tax and its own limit. The one that does not work is the one most often offered: freehold in someone else's name.

Seven ways the land can be held

The rights in the Agrarian Law and its implementing regulation, and who may hold each.

The one that does not work: a nominee

The Agrarian Law of 1960 is blunt. Any sale, gift or other act meant to transfer freehold directly or indirectly to a foreigner is void by law; the land falls to the State; the rights of others over it continue; and payments already received cannot be reclaimed (Pasal 26(2)). An arrangement in which a citizen holds freehold while a foreigner pays and controls is an indirect transfer of exactly that kind.

Leasehold: hak sewa

What it is

A person or company has a lease on land when they may use another's freehold land for a building by paying rent (UUPA, Pasal 44(1)). Rent may be paid once or at intervals, before or after use; the agreement may not contain exploitative terms (Pasal 44(2)-(3)). Foreigners resident in Indonesia may hold one (Pasal 45).

The term

Pasal 44 sets no maximum term. Twenty-five years, thirty, an option to extend — all of it is the contract's, and so is what happens at the end. The extension clause is the clause that decides what the villa is worth in year twenty.

The tax on the rent

The landlord owes a 10% final tax on the gross rent. A company tenant withholds it; a private tenant does not, and the landlord pays it (PP 34/2017, Pasal 3). The gross includes maintenance, security, service and facility charges paid to the landlord (Pasal 4(2)).

Not a BPHTB right

The list of rights whose acquisition carries BPHTB does not include a lease (UU 1/2022, Pasal 44(3)). The taxes on a sale.

Hak pakai: owning a house as a foreigner

Who may hold it, and for how long

Hak pakai with a term may be granted to foreigners (PP 18/2021, Pasal 49). Over freehold land it runs at most 30 years and can be renewed by a new deed granting hak pakai over the freehold (Pasal 52(3)). Over state land it is 30 years, extendable by 20 and renewable by 30 (Pasal 52(1)).

The house

A foreigner with immigration documents may own a house (Pasal 69); a landed house must be on hak pakai, either directly or over freehold by a PPAT deed (Pasal 71). The house can be inherited, by a foreign heir only if the heir also has immigration documents.

The limits

Ownership comes with limits on minimum price, plot size, number of plots and use as a residence (Pasal 72). The ministerial regulation sets them for landed houses: the luxury category, one plot per person or family, and at most 2,000 m², more only with the minister's permission (Permen ATR/BPN 18/2021, Pasal 186). The price threshold is set by a separate ministerial decision (Pasal 187(2)). A freehold or HGB plot bought by a foreigner is converted to hak pakai (Pasal 187(3)).

The residential limit and a letting villa

A villa let nightly to tourists is an accommodation business, licensed as one. A house held under a limit that includes use as a residence is not obviously that. The texts read for this page do not say whether letting breaches the limit, and we do not guess. It is the first question to put to the notary.

Where a PT PMA fits

The right to build (HGB) is for citizens and for legal entities established under Indonesian law and domiciled in Indonesia (UUPA, Pasal 36) — which a foreign-owned PT PMA is. The Agrarian Law gives it at most 30 years, extendable by 20 (Pasal 35). The company runs the letting under its own license, with capital and reporting obligations of its own. Owning through a PT PMA.

What this page does not cover

• The minimum price for Bali. Set by ministerial decision; not read.
• HGB renewal under PP 18/2021. Only the Agrarian Law's term was read.
• Lease clauses in detail. The Civil Code's lease provisions were not available in an official copy.

Common questions