PT PMA, Hak Pakai and HGB: Choosing a Legal Structure in Bali
Buy Villas in Bali Editorial Team · Last reviewed
Indonesian land law (UU No. 5/1960, the Basic Agrarian Law) reserves full freehold — Hak Milik — for Indonesian citizens only. A foreign individual cannot hold Hak Milik, and any arrangement that uses an Indonesian nominee to hold it on a foreigner's behalf carries serious legal exposure: nominee agreements are not recognised as enforceable by Indonesian courts, and the underlying title can be challenged or lost. This guide does not present nominee use as a safe option.
The three routes that are actually used lawfully by foreign buyers and investors are Hak Pakai (right of use, held by a foreign individual under PP No. 18/2021), a leasehold/Hak Sewa arrangement, and a PT PMA (foreign-investment limited company) holding Hak Guna Bangunan (HGB, right to build) or Hak Pakai in its corporate capacity. Each has a different holder, term structure, and exit mechanism.
This is a general orientation, not legal advice. Titles, zoning classification, land-use permits and the availability of each structure for a specific plot must be verified with a licensed notary/PPAT and, where a company is involved, through OSS/BKPM. Rules change, and due diligence has to be done against the current version of the regulation, not against a summary like this one.
Hak Pakai — right of use for foreign individuals
Hak Pakai is a limited right that can be held directly by a foreign individual who is legally resident in Indonesia, under the mechanism set out in PP No. 18/2021. It is the closest thing to personal 'ownership' available to a non-citizen, but it is not freehold and it is not unlimited in time.
- Initial term is granted for a fixed period, extendable and then renewable subject to conditions in force at the time of application.
- The holder must generally maintain the residency status the grant relies on; losing that status can affect the right.
- Hak Pakai can in principle be transferred or sold to another eligible holder, but the transfer itself must go through a PPAT and be registered with ATR/BPN — it is not a private handshake sale.
Leasehold (Hak Sewa) — a contractual right, not a registered title in the same sense
Most villas marketed to foreigners under 'leasehold' are sold via a notarised lease agreement between the Indonesian landowner and the foreign lessee, for a term commonly quoted in decades with an option to extend. This is a contract right against the landowner, not a BPN-registered real right in the way HGB or Hak Pakai is.
Extension terms live entirely in the wording of that specific lease agreement — there is no statutory guarantee of renewal. A lease that says 'extendable' without a fixed formula for the extension price and process is a weaker instrument than one that fixes both in advance.
PT PMA holding HGB or Hak Pakai
A PT PMA is an Indonesian limited liability company with foreign shareholding, established through OSS (Online Single Submission, overseen by BKPM). Once incorporated and licensed for the relevant business activity (a specific KBLI code, e.g. villa rental or hospitality operation), the company — as an Indonesian legal entity — can hold HGB (right to build, for commercial/business use) or Hak Pakai on land, subject to zoning and permitting.
This structure is generally used where the property is operated as a business (rental villa, hospitality asset) rather than held purely as a private residence, because it brings company-law obligations that a private buyer of a single holiday home would not otherwise take on.
- Minimum investment thresholds and paid-up capital requirements apply to PT PMA registration and are set/updated by BKPM/OSS — check the current figures on oss.go.id before budgeting.
- Ongoing obligations include annual financial reporting (LKPM investment activity reports to BKPM), corporate tax filings with DJP (pajak.go.id), and maintaining the KBLI licence that matches actual on-site activity.
- HGB has a defined term (commonly issued for a fixed number of years) that can be extended and then renewed while the underlying zoning and permits remain valid; extension is an administrative process through ATR/BPN, not automatic.
What happens on sale
- Hak Pakai: transferable to another eligible foreign or Indonesian holder via PPAT deed and BPN registration.
- Leasehold: assignable only if the underlying lease contract permits assignment; read that clause before assuming you can sell the remaining term.
- PT PMA structure: typically sold as a change of company shares rather than a land transfer, which has its own tax and corporate-law consequences and should be structured by a notary/corporate lawyer, not assumed to mirror a simple property sale.
What happens on death of the holder
Hak Pakai held by an individual generally passes according to inheritance rules applicable to the estate, but the heir must still meet the eligibility conditions to keep holding it (e.g. residency status), or the right may need to be transferred/sold within a set period — verify the current position with a notary.
Leasehold rights typically pass as a contractual asset of the estate, subject to whatever the lease document says about assignment on death.
Shares in a PT PMA pass as part of the deceased shareholder's estate under normal company and inheritance law, which is usually more straightforward to plan for with a will and correct shareholder agreement than a personally-held land right.
Comparison at a glance
| Structure | Who can hold it | Typical term | Sale mechanism | Reporting burden |
|---|---|---|---|---|
| Hak Pakai (individual) | Eligible foreign resident individual | Fixed term, extendable/renewable | PPAT deed + BPN registration | Low — personal, no company filings |
| Leasehold (Hak Sewa) | Any foreign party as contractual lessee | Set by the lease contract (decades common) | Only if the lease allows assignment | None — contractual only |
| PT PMA + HGB/Hak Pakai | Indonesian company with foreign shareholders | HGB fixed term, extendable/renewable while permits valid | Sale of company shares (usually), or corporate land transfer | High — LKPM, tax filings, licence maintenance |
When each structure is (and is not) appropriate
- Hak Pakai suits a foreign resident who wants a direct personal right for a home they intend to occupy, and who is willing to keep the residency status the grant depends on.
- Leasehold suits buyers who want a shorter-term, lower-commitment holiday property and who negotiate a lease with clear, pre-fixed extension terms.
- PT PMA is generally appropriate when the property is run as a rental or hospitality business, because the company structure both matches the licensing requirement for that activity (KBLI) and separates business liability from personal assets — but it brings real reporting and minimum-capital obligations that make it a poor fit for someone who just wants a private holiday home.
- None of the three should be confused with Hak Milik freehold, and no informal nominee arrangement converts any of them into freehold in substance.