Can anyone explain the purchase process in Bali???

DenpasarHouse

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Aug 13, 2013
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I don't agree with you DPH...where does it define in the Constitution an Indonesian cannot own a Hak Milik title to property? To the contrary, that's what happens in law, the Indonesian 'nominee' assumes the Hak Milik title in his/her name. What the Indonesian then wants to contract with HIS/HER property isn't defined in the Constitution.

Just because others say things doesn't make it true...Ministers talk crap all the time.

No-one is recommending but just mentioning it's available. It is ludicrous that foreigners, permanently resident in RI, are subject to this...especially as in our own countries (I'm Canadian) any foreigner, including Indonesians, own freehold properties...but that's another issue.

Sorry Davita, I honestly don't have time to go through all this again right now. But I'd ask that you re-read my posts from earlier.

I don't recommended it for the reasons I've stated above. To make things simple, I'd ask you to make it clear whether or not you would recommended the OP go through with her nominee agreement.
 

davita

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Mar 13, 2012
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If you don't have the time to explain what you said in your post #16 viz...."BUT you must be aware that in reality, what you're doing isn't legal."
I'll simply conclude you aren't convinced you are correct.

This isn't about making recommendations.... it's about law and I questioned why you say it isn't legal. Can you show where it says it's illegal for an Indonesian to own Hak Milik property....not your, nor anyone else's, interpretation.
 

Mark

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Apr 19, 2004
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From a legal perspective, I think it is safe to say that nominee arrangements are NOT rock solid under Indonesian law because the sole purpose of them is to circumvent the law prohibiting foreigners from owning land. You would never see an Indonesian use a nominee arrangement with another Indonesian (ie., WNI to WNI). It is solely a construct used to enable foreigners to believe that they 'own' land in a country where this is prohibited. While the matter has not yet made it to the top court in the country, I cannot imagine that the nominee structure would be upheld as it makes a mockery of the law against foreign ownership.

Having said this, it would take far more resources than Indonesia has at present to unearth and attempt to unwind all of these arrangements. Thus, so as long as there are no disputes between the parties involved, they may fly under the radar to everyone except the tax man, who may wish to know how the nominee suddenly acquired the wealth to buy the property and why no income tax was paid on that wealth. The recent amnesty took care of this for some nominees, however going forward there are certainly questions that will be asked and this may result in a hefty tax bill to the nominee and therefore to the foreign 'owner'.
 
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tel522

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From a legal perspective, I think it is safe to say that nominee arrangements are NOT rock solid under Indonesian law because the sole purpose of them is to circumvent the law prohibiting foreigners from owning land. You would never see an Indonesian use a nominee arrangement with another Indonesian (ie., WNI to WNI). It is solely a construct used to enable foreigners to believe that they 'own' land in a country where this is prohibited. While the matter has not yet made it to the top court in the country, I cannot imagine that the nominee structure would be upheld as it makes a mockery of the law against foreign ownership.

Having said this, it would take far more resources than Indonesia has at present to unearth and attempt to unwind all of these arrangements. Thus, so as long as there are no disputes between the parties involved, they may fly under the radar to everyone except the tax man, who may wish to know how the nominee suddenly acquired the wealth to buy the property and why no income tax was paid on that wealth. The recent amnesty took care of this for some nominees, however going forward there are certainly questions that will be asked and this may result in a hefty tax bill to the nominee and therefore to the foreign 'owner'.

Indeed.
 

davita

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Mar 13, 2012
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Mark...with respect you and DPH are missing my point.
Any 'construct or intent' by a foreigner cannot circumvent Hak Milik title as it must be owned by an Indonesian. The Indonesian named on the 'Sertipikat' owns the land...it's that simple.
My point is the foreigner doesn't own shit.....he can believe what he wishes but he has effectively given his money away and simply has to trust his nominee will abide by the contract. There is no-way contract law can circumvent Constitutional Law to own Hak Milik title. The Hak Milik title is owned by the Indonesian named and that is not illegal....and thus my point.
However, if there is some dispute on the foreigner's ability to use the property as provided in the Deed of Statement (Akta Pernyataan) he may be able to sue for a breach of contract ...good luck there!!! That's happened before and some win and some lose.

That's why the current recommendation is to get the nominee/seller to re-title the Hak Milik to the Land Office and a Hak Pakai (Leasehold Title) be issued to the foreigner from the Land Title Office. This gives the foreigner a guaranteed tenure and ability to mortgage, rent and sell the Hak Pakai title.

The tax amnesty was also misconstrued. There is no wealth tax in Indonesia...you only pay tax on income and so long as property was declared as an asset, and no income generated, then tax was moot. Many Indonesians own more than one property and declare them as assets. Unless income is received from the asset the only tax is land title/property tax.
I know because both 'my' properties were declared by my nominees since the beginning and amnesty was not needed. We pay all property taxes and banjar fees, etc. and the nominees do not receive any income.
Many others used amnesty because they hadn't previously declared income and didn't declare the property as an asset.
 

Mark

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davita, I see what you are getting at with the property title issue. However, I do not necessarily concur on the tax one. Putting the issue of the amnesty aside (which generated tons of confusion), it is within the scope of the tax man's inquiry to ask where the money came from for any major asset purchase / ownership. If a poor farmer suddenly owns land and villa worth Rp 5 billion, he must be able to document where the money came from to purchase /own this asset, and that money would in all likelihood be considered 'income'. Income is subject to income tax at marginal rates up to 30%. The same question can be asked if he suddenly drives a Ferrari. If the source of funds is not declared, and tax paid on the 'income', it is tax evasion. And, if a foreigner is involved via the nominee 'arrangement', it could also be considered money laundering unless it was structured as a loan, but then there would need to be interest and a declaration by the interest recipient of that interest income. Other than properly documented loans negotiated at arms length on commercially reasonable terms, the only tax free exchanges of money between individuals are gifts between the first degree of family relation (husband to wife, father/mother to son/daughter, etc.).
 

davita

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Mar 13, 2012
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I agree if the taxman wishes to investigate anyone that is their prerogative and the person would need to justify...that's another matter.

If it was money legally borrowed from a friend that is perfectly legal. People lend people money all the time..I just hope the amounts I've lent are repaid. It's only when a contract to pay interest on an IOU is written does it come under the aegis of needing a licence as a money-lender come into play. That's why the Deed of Statement should NOT include details of lending or gifting....it should only specify what use the owner of title confers to the foreigner. That's why it is a very risky thing for a foreigner unless having total trust in the nominee.
I'm aware that gifts are only tax-free from immediate family but lending money with an expectation it will be returned isn't gifting....some call that 'Indian giving'...:D.

I've heard all those arguments before and it strikes me they are interpretations some naysayers want to believe...nothing has ever been tested in court.

The fact I wanted to address is DPH stated that the OP and, consequently, myself were doing something illegal. I take exception to that statement and wanted some substantiation...which apparently isn't forthcoming.
 

DenpasarHouse

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Aug 13, 2013
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Regarding legal precedents, I don't know how you can look up individual cases but Susi Johnston claims to have taken it all the way to the Supreme Court and lost:
http://www.smh.com.au/world/a-nightmare-in-paradise-20150709-gi8lrr.html
"I have lost all the way to the Supreme Court. Foreigners should be spooked. No nominee arrangement is valid."

Mark...with respect you and DPH are missing my point.
Any 'construct or intent' by a foreigner cannot circumvent Hak Milik title as it must be owned by an Indonesian. The Indonesian named on the 'Sertipikat' owns the land...it's that simple.

You're getting hung up on the concept of ownership when it's the issue of "control" that is explicitly forbidden in the Indonesian constitution. I mentioned that in an earlier post. Since the SOLE purpose of the nominee system is to gain "control" over Indonesian land it is automatically invalid and illegal.

Admittedly, there was some sloppy talk (or possibly sloppy translations) coming from the Minister. Here's a good example:
https://baliadvertiser.biz/hurrah-f...ries-for-the-usual-suspects-time-to-shape-up/
First, on March 10 Minister of Agrarian and Spatial Planning and Head of the State Land Board, Ferry Baldan made an announcement clarifying beyond any doubt something we all either knew or should have known already. In a statement to the press the Minister said “Foreigners are absolutely not allowed to own an inch of land in Indonesia under the constitution of Indonesia.” He went on to say that the government intends to clamp down on all contravention of the law so as to eliminate the glaring gap between theory and practice.

He really should have said "control" rather than "own". But for your arguments to be valid, you'd have to believe that he was actually railing against the listing of foreigners as the official owners on land certificates. As far as I'm aware, this has never been an issue, although I wouldn't be surprised if had actually happened a few times.

In the same article it's made clearer that he's referring to nominee arrangements. See here:
Minister Baldan went on to make the specific point that this step was not intended to punish or disadvantage foreigners holding land through nominees and that they would have 18 months to two years to regularize their tenures and protect their investment under the various forms of land tenure open to them under existing law. Only after that period of grace and following proper investigation would the state resume land not held in compliance with the law.

Regarding the Tax Amnesty, you're definitely mistaken. Mark's explanation is spot on:
. . . it is within the scope of the tax man's inquiry to ask where the money came from for any major asset purchase / ownership. If a poor farmer suddenly owns land and villa worth Rp 5 billion, he must be able to document where the money came from to purchase /own this asset, and that money would in all likelihood be considered 'income'.

I know this because my wife was "invited" to the tax office during the amnesty to explain the origin of the money used to buy her (I mean our) assets. i.e. Land, house and car. This was totally understandable, since she doesn't actually have any income. While it was made clear that if we couldn't account for it we'd have to join in with the amnesty, they were very professional and weren't trying to trip us up. Long story short, we didn't have to pay anything extra because it's all covered under gifts between husband to wife, but I did have to show all my bank statements proving the origin of the money and my Australian and Indonesian tax returns to prove that income tax had already been paid on the money used to purchase the assets. Why were we targeted and not others? Don't know. I suspect it was because the previous owner of our land was caught up in it, and they were following his trail.
 

davita

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Mar 13, 2012
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1. Regarding legal precedents, I don't know how you can look up individual cases but Susi Johnston claims to have taken it all the way to the Supreme Court and lost:
http://www.smh.com.au/world/a-nightmare-in-paradise-20150709-gi8lrr.html




2.a. You're getting hung up on the concept of ownership when it's the issue of "control" that is explicitly forbidden in the Indonesian constitution. I mentioned that in an earlier post. Since the SOLE purpose of the nominee system is to gain "control" over Indonesian land it is automatically invalid and illegal.

Admittedly, there was some sloppy talk (or possibly sloppy translations) coming from the Minister. Here's a good example:
https://baliadvertiser.biz/hurrah-f...ries-for-the-usual-suspects-time-to-shape-up/


2.b. He really should have said "control" rather than "own". But for your arguments to be valid, you'd have to believe that he was actually railing against the listing of foreigners as the official owners on land certificates. As far as I'm aware, this has never been an issue, although I wouldn't be surprised if had actually happened a few times.

In the same article it's made clearer that he's referring to nominee arrangements. See here:


Regarding the Tax Amnesty, you're definitely mistaken. Mark's explanation is spot on:


3. I know this because my wife was "invited" to the tax office during the amnesty to explain the origin of the money used to buy her (I mean our) assets. i.e. Land, house and car. This was totally understandable, since she doesn't actually have any income. While it was made clear that if we couldn't account for it we'd have to join in with the amnesty, they were very professional and weren't trying to trip us up. Long story short, we didn't have to pay anything extra because it's all covered under gifts between husband to wife, but I did have to show all my bank statements proving the origin of the money and my Australian and Indonesian tax returns to prove that income tax had already been paid on the money used to purchase the assets. Why were we targeted and not others? Don't know. I suspect it was because the previous owner of our land was caught up in it, and they were following his trail.

1. I'm very familiar with Susi Johnston's situation. I went to her seminar and talked with her. Her situation is her nominee was 'stealing' her property. I had her in mind when I said that can happen and it does qualify what I've been saying all along...the name on the title deed IS the owner and that isn't illegal. The only agreement a foreigner actually has is trust in the nominee.....and that isn't illegal either.
This is from your link..."It is also fraught with risk. The Indonesian nominee is the legal owner if the relationship sours or the nominee dies and their family does not honour the agreement." I agree and mentioned that in a previous post.

2.a. You stated that having a nominee own the HM title was illegal and I challenged where this is substantiated. You haven't provided that .... so don't change the subject to 'having control'...that's irrelevant and does not appear in any constitutional agrarian law.
2.b. Minister Ferry Baldan makes many predictions and nothing so far has happened. Developers in Jakarta are still waiting for his explanations on his statute about foreigners owning apartments there.

3. I don't see why I'm mistaken when you have just agreed with what I said. If the money was legal, and all taxes paid, there was no need to apply for amnesty. The tax law only states all assets must be declared. Lending someone money, if it was legally earned, isn't a crime.
 

mugwump

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Mar 15, 2011
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I am hesitant to stick my toes in this hot water, but what is the difference between an Indonesian bank loaning money for a purchase of property and a foreigner doing it? They both have a collateral interest against the loan. That interest must be recognized in court if an agreement has later been jeopardized by virtue of a deviation from the original agreement entered into. At this juncture foreign ownership has no bearing upon the fracture of the binding contract. Foreign ownership only begins to be a problem when an action of foreclosure occurs and the foreigner doesn't have physical possession of the property in question as an option. Then there could be options of a quasi ownership substitute.
If the foreign lender holds physical possession of the Hak Milik document and the nominee tries to feign true ownership without payment of the debt there is a process they must pursue by stating the document has been lost and advertising in the newspaper for a certain period to obtain a substitute document, BUT the neighbors in the immediate community must also attest to their knowledge that this is all bona fide which may be difficult to do if the neighbors don't support the pseudo owner's claim. It wouldn't be an easy thing to do especially if those neighbors also happen to be dependent upon the lender's employment which can frequently be the case.
Just a perhaps different look at the reality of the situation.
 

davita

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Mar 13, 2012
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I am hesitant to stick my toes in this hot water, but what is the difference between an Indonesian bank loaning money for a purchase of property and a foreigner doing it? They both have a collateral interest against the loan. That interest must be recognized in court if an agreement has later been jeopardized by virtue of a deviation from the original agreement entered into. At this juncture foreign ownership has no bearing upon the fracture of the binding contract. Foreign ownership only begins to be a problem when an action of foreclosure occurs and the foreigner doesn't have physical possession of the property in question as an option. Then there could be options of a quasi ownership substitute.
If the foreign lender holds physical possession of the Hak Milik document and the nominee tries to feign true ownership without payment of the debt there is a process they must pursue by stating the document has been lost and advertising in the newspaper for a certain period to obtain a substitute document, BUT the neighbors in the immediate community must also attest to their knowledge that this is all bona fide which may be difficult to do if the neighbors don't support the pseudo owner's claim. It wouldn't be an easy thing to do especially if those neighbors also happen to be dependent upon the lender's employment which can frequently be the case.
Just a perhaps different look at the reality of the situation.

I believe to lend money in Indonesia, as you describe, the lender has to be registered as such and I doubt if a foreigner is allowed to be a registered money-lender....but worth a try!

In Indonesia it is very easy to declare the HM Title document lost and have another copied from the land office if a KTP is produced and the name etc. corresponds to the HM title holder....and a little money smooths the way.

I'm not advocating that the nominee owning the property the foreigner paid for isn't fraught with danger....my contention is it isn't illegal as the nominee is named on the Hak Milik title....even if the foreigner keeps the document.
The contract, or deed statements, are just that....they indicate the intent of the relationship between parties and, if not complied with, may be the subject of a legal breach of contract...but that can never dispute the HM ownership.

I keep my documents and don't think my nominees have ever seen them...but I have faith in my nominees.
 
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mugwump

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I believe to lend money in Indonesia, as you describe, the lender has to be registered as such and I doubt if a foreigner is allowed to be a registered money-lender....but worth a try!

In Indonesia it is very easy to declare the HM Title document lost and have another copied from the land office if a KTP is produced and the name etc. corresponds to the HM title holder....and a little money smooths the way.

I'm not advocating that the nominee owning the property the foreigner paid for isn't fraught with danger....my contention is it isn't illegal as the nominee is named on the Hak Milik title....even if the foreigner keeps the document.
The contract, or deed statements, are just that....they indicate the intent of the relationship between parties and, if not complied with, may be the subject of a legal breach of contract...but that can never dispute the HM ownership.

I keep my documents and don't think my nominees have ever seen them...buy I have faith in my nominees.
 

mugwump

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Mar 15, 2011
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I am not suggesting the foreigner be a registered lender. My statement was meant in theory only as a comparison. The land being the collateral for the loan.
 

davita

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I agree with your collateral theory and have used a similar construct on properties I owned in USA and Canada to liquidate profit without selling the property.
In countries that have laws that can be understood and are fair, which can be judiciously applied and which are not manipulated by graft, your point makes sense...... but here in Indonesia, those laws are not so easy to find.
 

mugwump

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I agree with your collateral theory and have used a similar construct on properties I owned in USA and Canada to liquidate profit without selling the property.
In countries that have laws that can be understood and are fair, which can be judiciously applied and which are not manipulated by graft, your point makes sense...... but here in Indonesia, those laws are not so easy to find.
 

Fred2

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Oct 13, 2010
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Anyone can loan money to a Indonesian, If it was for land you would be listed on the documents. You are only entitled to the money amount on the agreement not the land. The court would auction the land and you would receive money out of the sale.
No one is asking what Visa you need to lease land in Indonesia ?
 

davita

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1. Anyone can loan money to a Indonesian, If it was for land you would be listed on the documents. You are only entitled to the money amount on the agreement not the land. The court would auction the land and you would receive money out of the sale.
2. No one is asking what Visa you need to lease land in Indonesia ?

Hi Fred2 where ya been....long time no see!
1. Of course anyone can lend money but, if it needs to be documented, there may be an issue that the foreigner is doing business in RI and maybe some repercussion from that.
2. Legally, under the new law, a Hak Pakai leaseholder has to reside in RI...that presumes a Kitas/Kitap.
 

Fred2

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A foreigner can make a loan in Indonesia and with any country paper work has to be filled out, its legal.
Seem funny that tourist on a 30/60 day visa can think they can buy land (under anyones name) rent out a villa or own a bunisess.
davita when you ask if there are any court cases out there, do you really think people would go that far. The notary would say try and
work it out with you nominee (money), a lawyer would ask for a truck load of money, then half say you never win give me more money.
You have rember you a walking ATM.
Been working in Australia 6 days aweek so not muck time for forum.
 

davita

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Thanks Fred2...I agree some things are done in Indonesia, even if against the law, and nobody cares. I just think it prudent that we advise, on the forum, according to law....and then others can accept or reject that caveat.
I 'own' two properties (an apartment in Jakarta and a villa in Bali) and was advised, by a lawyer, to defer from getting a legal document to say I lent the money as it might be construed I'm in the business of money-lending. Maybe just having one would fly under the radar.
My question about court cases really refer to any that the government has seen fit to charge to prove that a 'nominee owning HM property' is illegal. I already conceded there's been many civil disputes between foreigners and their nominees...but that is another matter.

If you enjoy work and getting paid well 'good on ya'. I've been retired since 1990, never worked harder and not been paid a cent....but enjoyed every minute....:D
 
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