This begs the question “If Indonesian law forbids foreigners from purchasing property in Bali, how can any foreigner own a villa In Bali?”. Well, the law as it applies in Bali forbids outright ownership of property by foreigners, but that does not they cannot enter into legal arrangements which would in effect allow them to own and run a Bali villas rental business.

As you will discover as you read on, there are various categories of property ownership in Indonesia, which means that in Bali you can obtain either ownership or the use of a villa to rent it out to holidaymakers.

Property Ownership In Bali

Under Indonesian law, there are three main categories of property ownership.

Hak Milik: This is the freehold ownership of property or land, and as Indonesian law currently stands this is only open to citizens of Indonesia or specific legal entities which exist in that country. As such it means foreign citizens cannot own property, but keep reading as we will come back to the legal entities.

Hak Pakai: This refers to the right to use a property, but only for residential purposes. This is open to foreigners who can have the right to use a property as their residence for up to 30 years, although that can be extended to a total of 80 years.

Hak Guna: This is the right to build. This right applies to companies registered in Indonesia allowing them to build properties, including villas for up to 30 years, although extensions can add another 50 years to that.

Foreigner Rights Relating To Property

From what we have just discussed it is clear that Hak Pakai and Hak Guna are options for foreigners, albeit the Hak Pakai could not be used to run a Bali villas rental business. Even with these rights, there would be several points that you would need to clarify with the local authorities, including your intention for the property, your residence status, and the current land title.

How To Purchase A Bali Villa With The Intention To Rent It Out

As it stands there are two main ways you could purchase a Bali villa although legally you would not own it. The first is for you to use an Indonesian citizen who would act as a nominee for the purchase. In effect, their name would be on the property title and under Indonesian law they could claim sole ownership. This is a highly risky venture and one which has to be done with the utmost care.

The second, and the more legitimate way is to purchase a property using an Indonesian corporation. To do this you would set up a PT PMA (Perseroan Taratas Penanaman Modal Asing) which would give you the right to conduct business in Bali and earn profits from that business. It obviously would also allow you to purchase a Bali villa although it would be the company that owns it rather than you as an individual.

Once you speak to a good commercial lawyer you will see that there are many ways to protect your business assets and ensure they are passed on to your family, but they vary to a certain extent depending on the type of business structure you used to set up the business. It could be a sole trader, partnership, have several co-owners and so on. But one thing is for sure; no matter what type it is, if there is no estate plan or Will, much of the value will be lost, going to the state to cover the cost of settlement.

With recent changes to the laws regarding business there are now more ways to separate your business assets from the risk of litigation and other business risks. Lawyers can help you to wade through the often confusing legalities involved in protecting your business assets from loss.  They are also the best people to help you work out the best and most efficient ways to ensure the assets of your business go to your heirs should you not be around to run the business.

Sometimes, setting up a trust is the way to go. This protects your business so it can become a legacy to your family rather than a burden.

Whether you own a business or not, it is still important to make out a Will at the very least, so that your final wishes can become reality for your family and so that there will be no family disputes regarding your estate and who should benefit most. If you have a lot of assets from various sources it is even more important to ensure your estate planning is up to date and you should review it from time to time when your personal circumstances change.

Even with the passing years there could be more children born or others may pass away. Children can marry and then pass away, leaving their spouse to collect their inheritance. There can be divorce, widowhood or remarriage. This can result in an unfair distribution of assets that can cause family disruptions and in any case, might not be what you intended.

When you review your estate plan whether it is for business or a personal estate, these things can be taken care of.