Table of Contents
1. Legal Ownership: What a PT PMA Can and Cannot Buy
Foreign individuals cannot hold Hak Milik (Freehold). A PT PMA (Perseroan Terbatas Penanaman Modal Asing), however, can legally hold land under:- Hak Guna Bangunan (HGB) – Right to Build, valid for 30 years + extendable to 80 years.
- Hak Pakai (HP) – Right of Use, generally for residential or smaller-scale developments.
2. The Conversion Process: Hak Milik → HGB
When a PT PMA purchases land from an Indonesian owner, a licensed notary (PPAT) manages the conversion process with the National Land Agency (BPN). This legally changes the ownership rights from Hak Milik (individual ownership) to Hak Guna Bangunan (company ownership). Key Points: The land remains State-owned, while the PT PMA holds long-term building rights.- Conversion ensures full legal compliance and allows leasing, developing, or reselling the asset.
- Typical processing time: 1–2 months with complete documentation.
3. Total Costs When a PT PMA Purchases Property
| Item | Who Pays | Rate / Amount | Notes |
|---|---|---|---|
| BPHTB (Buyer’s Tax) | Buyer | 5% of property value | Mandatory government transfer tax |
| PPh (Seller’s Tax) | Seller | 2.5% of sale value | Final income tax on sale |
| Notary / PPAT Fees | Buyer | 0.5 – 1% of transaction value | Includes due diligence, AJB, and BPN registration |
| Title Conversion (HM → HGB) | Buyer | IDR 15 – 30 million per certificate | Administrative + notary fees for each land title |
| Company Setup (PT PMA) | Buyer | IDR 25 – 40 million | Only if the company is not yet established |
| Translations / Misc. Documents | Buyer | IDR 2 – 3 million | For bilingual contracts or foreign shareholders |
- BPHTB: 250 million
- Notary (0.75%): 37.5 million
- Title Conversion (per certificate): 25 million
- Total Estimated Buyer’s Expenses: ≈ 312 million IDR (~6.2%)
4. The 5% Misunderstanding
Many foreign buyers mistakenly believe that converting Hak Milik to HGB costs 5%. In reality, that 5% refers to the BPHTB (Bea Perolehan Hak atas Tanah dan Bangunan) — the government tax on ownership transfer, not the conversion itself.Key Insight
The “5% conversion fee” quoted by some agents is misleading — it bundles the government transfer tax (BPHTB) with the actual conversion cost. The real title conversion fee is IDR 15–30 million per certificate, far lower than 5% of property value. Always ask your notary to itemise each cost separately before signing.
5. What About “Lepasan HGB ke Negara”?
You may come across properties described as “lepasan HGB ke negara”, meaning the HGB right has been released back to the State. This is a different legal scenario involving expired or returned land titles, and the process to reapply for new HGB rights is distinct. We’ll cover this topic in detail in our next blog post, explaining the meaning, process, and real costs involved when dealing with lepasan land.6. Key Takeaways for Investors
Key Takeaways
- PT PMA cannot own Hak Milik directly — only HGB (Right to Build, 30 years extendable to 80) or Hak Pakai.
- Title conversion (Hak Milik → HGB) is a legal requirement, not a penalty — costs IDR 15–30 million per certificate.
- The 5% figure most buyers hear is the BPHTB government transfer tax — not the conversion fee.
- Total buyer costs on a IDR 5 billion property: approximately IDR 312 million (~6.2%).
- Always use a licensed notary (PPAT) experienced in foreign ownership and PT PMA acquisitions.
Frequently Asked Questions
Can a foreigner buy freehold property in Indonesia?
No — foreigners cannot hold Hak Milik (freehold title) directly under Indonesian law. The legal routes for foreign buyers are leasehold (Hak Sewa, 25–30 years extendable), Hak Pakai (Right of Use with valid stay permit), or establishing a PT PMA company to hold land under HGB (Right to Build) title.
What is a PT PMA and how does it work for property ownership?
A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a foreign-owned company registered in Indonesia. It can legally hold land under HGB (Hak Guna Bangunan) title, giving the foreign shareholder(s) effective long-term control over the property. The company requires at least two shareholders and a minimum registered capital of IDR 10 billion.
How much does it cost to set up a PT PMA in Indonesia?
PT PMA company setup costs typically range from IDR 25–40 million, covering notary fees, OSS registration, and documentation. This is a one-time cost. Annual compliance costs (reporting, accounting) add approximately IDR 10–20 million per year depending on the provider.
What is the difference between BPHTB and the HGB conversion fee?
BPHTB is the government property transfer tax — 5% of transaction value, paid by the buyer on every property purchase. The HGB conversion fee is a separate administrative cost for converting a Hak Milik title to HGB — typically IDR 15–30 million per certificate, regardless of property value. These are two distinct costs that are often incorrectly bundled together by sellers and some agents.
How long does the PT PMA property purchase process take in Bali?
A typical PT PMA property transaction in Bali takes 6–12 weeks from offer to completed title transfer. This includes company setup (if not already established), due diligence, notary engagement, title conversion, BPHTB payment, and BPN registration. Having all documentation prepared in advance significantly reduces this timeline.
