Setting up a PT PMA in Bali

In Bali, and more generally in Indonesia, the law does not allow foreigners to own land in their own name. When you want to buy real estate in Bali, you’ll commonly have a choice between two types of ownership: the Leasehold (equivalent to the Bail Emphytéotique in France), usually concluded over a period of 25 to 30 years, or the purchase in “PT PMA”, a foreign-owned company through which it is possible to own a property.

What is PT PMA?

In Indonesian, the term “PT PMA” stands for ” Perseroan Terbatas Penanaman Modal Asing “.

In other words, PT PMA is a foreign-owned limited liability company whose purpose is to conduct business activities in Indonesia.

As stipulated in Law 25/2007 on investment, foreigners can only run a business and generate income through a PMA PT. The company can be 100% foreign-owned, and can also own real estate.

How to create a PMA?

To create a PT PMA, a number of conditions must be met:

• PT PMA must have at least two shareholders. At least one shareholder must be a foreigner. If the director is a foreigner, he or she must obtain a tax identification number (NPWP) and a work permit (IMTA), then benefit from a free long-stay visa (KITAS) and establish domicile in Indonesia.
• The minimum capital requirement is IDR 10 billion (approx. €575,000*) per shareholder. In the event of an audit, you must be able to prove possession of these funds at any time.
• You must have an address in Indonesia. The director of the PT PMA must reside in Indonesia, and the company’s address must also be located in Indonesia. This cannot be the director’s personal address; business premises must be rented in order to obtain the company’s domiciliation.

The process of setting up a PT PMA is complex, requiring registration with the Indonesian Investment Coordinating Board (BKPM), opening a bank account in Indonesia, obtaining a tax number and registering with the Ministry of Manpower.

Particularly as a foreigner, it’s important to be well advised, and it’s strongly recommended to call on local legal experts who can support you throughout the creation of your PMA.

The advantages of using a PT PMA for a property purchase

The first advantage of PT PMA is that, through this company, you can obtain an SHGB (Sertifikat Hak Guna Bangunan) title. In Indonesia, this certificate of building use rights is a type of certificate that allows its holder to own and construct a building on land that may be controlled directly by the state, or by individuals or legal entities.

This SHGB title, obtained through your PT PMA, has the advantage of being well regulated by Indonesian law:

• This title is valid for 30 years, extendable for a further 20 years, for a total period of 50 years, in accordance with Article 35 of the Indonesian Law on the Regulation of Fundamental Agrarian Principles (UUPA).
• According to article 36 of the same law, the right to use the buildings may be held by any Indonesian citizen and by any legal entity established under Indonesian law and domiciled in Indonesia.

The SHGB title is the strongest property title a foreigner can have, below the Hak Milik (full ownership title only available to Indonesians).

It is convertible into a fully-owned SHM (Sertifikat Hak Milik) if resold to an Indonesian, and its value does not diminish over time as is the case with a Leasehold. This makes it an attractive long-term acquisition.

The second advantage of buying via a PT PMA is that you are allowed to generate rental income legally without going through an external management company, as you own your own company to do so.

When should you buy a leasehold?

An alternative way to buy real estate in Bali and Indonesia is to acquire a property in Leasehold(Hak Sewa menyewa). The advantage is that this title is fully accessible to foreigners, and there’s no need to set up a company. Another point is that property acquisition prices will generally be lower than when buying via a PT PMA.

Leaseholds are generally concluded for a period of 25 to 30 years, followed by a negotiable renewal with the landowner for 25 to 20 years, for a total term of 50 years. The major disadvantage is that, in the event of resale, you will only be able to resell the remaining years of the lease: it is therefore important to ensure that there is sufficient time left on the lease when you buy to be able to take full advantage of it, since at the end of the lease, the land and its construction revert to the Indonesian landowner.

However, a leasehold purchase is preferable if you don’t have the means or the time to take on the complex management of a PT PMA (capital requirements, partners, residence in Indonesia, minimum annual turnover, staff management, etc.), or if you are investing in a single villa.

The PT PMA is particularly interesting for people planning to live in Indonesia on a long-term basis, with substantial capital and a good knowledge of the country. You also need to be prepared to invest a certain amount of time in maintaining the company, which has a legal obligation to be maintained and active, at the risk of losing the assets attached to it, should it cease trading.

This article is for information purposes only, to answer common questions about property types in Indonesia. Whatever type of acquisition you choose, it’s important to get in touch with specialized legal experts who can advise you in greater detail on the subject.

Osiris Investissements can help you purchase your property in Bali. In the course of our relationship, we can put you in touch with legal experts if you wish. Contact us directly or consult our list of Bali villas.

*Indicative conversion into €, based on the exchange rate at the time of publication of this article. Amount defined in IDR.

Sources :

https://ownpropertyabroad.com/indonesia/how-to-establish-pt-pma-foreigner/

https://www.permitindo.com/news/pt-pma-indonesia

https://balitreasureproperties.com/acquiring-an-hgb-property-through-pt-pma/