Financial Environment

Overall investment climate in Indonesia is very attractive to foreign investment access. The availability of fiscal incentives to attract foreign investors, no limitation on the value of investment, the possibility for foreign investors to wholly own their investment in almost all sectors and simplified investment approval process are some of advantages for foreign investment to invest their money in Indonesia. As a member nation of the ASEAN countries, Indonesia is located on the cross road of two great continents, namely Asia and Australia, and the Indian and Pacific oceans, offer some comparative advantages to investors with attractive ranges and combinations such as:

• A vast, fertile country endowed with rich and diversified natural resources, among others agricultures, plantations, fisheries, mining, oil, and gas.
• A large population of about 237 million and dynamically adaptive to progress, constituting a huge potential market as well as the competitive work force.
• A strategic location controlling vital international sea communication lines.
• A more democratic country.

The Indonesian government realizes that investment is one of the most important factors in driving economic growth and, thus, tries hard to improve investment procedures in the future in order to stimulate a more favorable investment climate.

Banking

As per July 2008, there are 1 central bank, 37 foreign exchange banks, 42 non foreign exchange banks, 26 regional government bank, 28 joint venture banks, 10 foreign banks, and 3 syariah banks.

Tax

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Financial Planning
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Buying Property in Indonesia

Ownership over rights of land by foreign citizen in Indonesia

Indonesian Property Law
Please note that the information here supplied is to be used as a guide only. For exact information please consult a lawyer or notary in your area, and seek advice from foreigners who have been living in Indonesia for some time. There are exceptions on the information here supplied, depending on the area of Indonesia; rules in Batam and Jakarta could be different.

Can a foreign person or other foreign entity legally purchase property in Indonesia? The Indonesian government issued Law 5 of 1960 on the "Basic Regulation of Land in Indonesia" ("UU 5/1960"), which came into force on 24 September 1960. It can be said that UU 5/1960 established revolutionary new rules and principles concerning rights in land. UU 5/1960 recognized and regulated several rights over land and houses, including the: Right of Ownership (Hak Milik), Right to Cultivate (Hak Guna Usaha), Right of Building (Hak Guna Bangunan), Right of Use (Hak Pakai), and Right of Building Lease (Hak Sewa Atas Bangunan).

Property Rights of Foreigners UU 5/1960 only allows foreigners to obtain Right of Use or Right of Building Lease. However, UU 5/1960 only provides very general information on how to obtain either of these rights, the maximum time period, or the legal assurances provided. As a result, many foreigners in Indonesia are not willing to engage in such transactions because they do not know the regulations or feel insecure with the regulations.

Right of Use is a right over land, either State-owned or private, which gives the holder the right to use and obtain the product of a certain piece of land. Government Regulation No. 40 Year 1996 regarding Right to Cultivate, Right to Build and Right of Use Over Land (“PP 40/1997”) states that the initial period for Right of Use over State-owned land is not to exceed 25 years but can be extended for an indefinite time if the land is still in use for a certain reason, and non-extendable for Right of Use over right of ownership. Right of Use may be owned by Indonesian citizens, resident foreigners, Indonesian legal entities domiciled in Indonesia, and foreign companies that have a representative office in Indonesia.
A person or a legal entity may have a right to lease land if (s)he/it is entitled to use other person’s land for building and a sum of money and rental fee. The payment could be one-time or periodical as determined by mutual understanding between the parties. Right of Land Lease may be owned by Indonesian citizens, resident foreigners, Indonesian legal entities domiciled in Indonesia, and foreign legal entities that have a representative office in Indonesia.

Procedures for Property Acquisition
All transactions of land rights must be set forth in deeds executed before a land deed official (Pejabat Pembuat Akta Tanah/PPAT) having area of jurisdiction over the location of the land and must be registered in the regional office of the National Land Agency. PPAT is a state agent who is authorized to handle, among others, land acquisition matters.

Property Sales Tax
When property is sold there is tax to be paid by both the selling and the buying party. This is (currently) 5%, for each, over the amount that is on the sale and purchase agreement. Please note that the amount on the sale and purchase agreement can be different from the actual price agreed upon. Developers usually include all in their pricing schemes, but when negotiating please ask how sales tax will be handled. Many a foreigner got an unpleasant surprise after agreeing on a price and hearing of the extra tax.