In Indonesia, foreigners are prohibited to own a Hak Milk (freehold title) of land under the Indonesian Agrarian Law. Freehold lands only belong to Indonesian citizens.
Foreigners are only entitled to Hak Pakai (leasehold title) of land, i.e. the right of use of land. Therefore, even a foreigner inherits a freehold land through a marriage with an Indonesian national, they will have to release the land by selling or granting it within a year upon the receipt of the land.
If foreigners do not do so within the period specified by law, the inherited land will be taken by the state and the foreigner’s land ownership title will be removed as well.
Legally, Special Purpose Agreements that leverage professional shareholder or director or commissioner services to transfer freehold lands to foreigners are not permitted as it does not conform to the legislation that was previously mentioned.
However, there is always a solution. Foreigners can in fact take advantage of the binding power of Special Purpose Agreements to obtain land in Bali.
It is possible for foreigners to obtain land in Bali when they make use of the Special Purpose Agreements described below:
1. Land Ownership Agreement (with The Power of Attorney)
The local partner acknowledges that the foreigner (beneficiary) who provides the fund to buy the land is the owner of the land even though the land is registered under the local partner’s name. The power of attorney will also present to provide authorisation that the beneficiary can carry out activities on the land.
2. Lease Agreement
The local partner leases the land to the foreigner within a specific time frame. Extension of the lease is possible.
3. Option Agreement
The beneficiary is given the option to buy the land from the local partner that was previously bought with the beneficiary’s money.
4. Loan Agreement
The local partner buys the land with funds from the beneficiary provided as a loan. Under the loan agreement via a mortgage mechanism, the local partner and the beneficiary use the land as the loan collateral.
5. Grant with Testament (Hibah Wasiat)
The land and property are granted to the beneficiary by the local partner.
Before signing a deal through the Special Purpose Agreement for your Bali land ownership, it is essential, or compulsory in practice, to conduct due diligence.
Things you have to validate with your due diligence include the following:
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