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by | May 11, 2020 | Uncategorised | 0 comments

Right to build (HGB)

The safest way to acquire property is to register a 100% foreign owned company, and to acquire land on the name of the company with the so called Right to Build Certificate Title (HGB). This certificate can be on a 100% foreign owned company name for a maximum 80 years. Even though it sounds more like long-term leasehold, it can be considered as ownership, as the company name goes to the land certificate, and the company has full rights to the land. Since the land is on the company name, it is not legal to acquire land for purely personal use – the company should have activities, income, and pay respective taxes. 

After 80 years, the land should go back to its original state. What does it exactly mean? We do not know because the regulation has not been tested in practice. It should mean that the land can go back to its original owner or to the state and the owner of HGB should receive compensation.  As it is possible to sell the HGB title to an Indonesian individual as “freehold/hak milik” anytime during the validity of the HGB, it is believed in legal theory that it is possible to transfer the land to the Indonesian individual, and then back to your company to restart the HGB for another 80 years. Of course, the transaction expenses and taxes will be involved.

 

Right to Use

Right To Use Certificate Title (Hak Pakai), this property ownership title enabling individual foreigners who domiciled in Indonesia to have a residential housing with a maximum 80 years of ownership. For Hak Pakai, it requires a KITAS. If acquiring land based on KITAS, 1 KITAS can hold 1 Hak Pakai Certificate, maximum 20 acre for residential, and the land must have a building on it (house or villa, cannot be only land), min. value 5 billion Rupiah. It is not regulated how fast you have to sell the property; hence you should sell it before losing your KITAS.

 

Registering a 100% foreign owned company.

The company must have at least 2 shareholders. However, for some of the activities 100% foreign ownership is allowed, thus the company can be fully controlled by a foreigner and the foreigners’ family. 

 

For acquiring real estate, the most commonly used business classification is “real estate” with the following business classification description: This group includes the business of buying, selling, leasing and operating of real estate which is owned by the company directly or leased. The real estate includes apartment buildings, residential buildings and buildings not used for living (such as exhibition space, storage facilities, malls, shopping centres and other). This business classification includes selling of the real estate, the development of the building for its own operation (for the leasing of the spaces in the building).

 

The company registration takes around 1-3 months. However, you can acquire the land on the name of the company as soon as the company’s Articles of Association and the Ministry of the Law and Human Rights approval to the articles of association and company’s tax card have been issued. These are the first company licenses that are processed and take usually around 2-3 weeks to complete if all the shareholders and director and commissioner are available to sign. 

 

A notary drafts a PPJB (Binding Sale & Purchase Agreement) and mentions that the property will be under name of the company, and the parties will sign the agreement.

 

The title of the land will be changed into Right to Build Certificate (HGB) as a company is allowed to own only this certificate. This step can be skipped if the land certificate is already HGB. The timeline for changing the certificate at the land agency varies but can be around 1-3 months. 

 

Once the HGB Certificate is issued, the Notary will proceed with AJB (Sale and Purchase Agreement) and the tax payment related to this transaction.

 

The process of signing Binding Sale and Purchase agreement, taxes, final Sale and purchase agreement until Certificate title transfer will take approximately 4-6 months.

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