Warning: Do Not Buy Villas in Bali
There are many Bali villas real estate sites all showing dream vacation homes available for "freehold" with "significant investment return" and / or "rental potential"; do not believe a word of it, they are all liars, fraudsters and I will explain why. The only legal method for foreigners to control the all important aspects of a villa in Bali is not currently used by villa sales agents, you can read about this method here: ABN Method.
I will take you through the various cons (there are three main ones) each of these sales agents employ at least one of. I will show you that foreigners can not own land and can not own property and can not legally operate holiday villas for rent in Bali (unless you use the above method), citing the Indonesian civil code (law) and what it means. The only foreigners that can have the right of use of a residential property in Bali and for that matter the whole of Indonesia are those with legitimate work permits who are resident there and only then on rent as their main residence. So many villa agents promise customers they will get them a work permit / residency and generally they will, through corruption; but that makes the visa unlawful. But even if you could get a work or residency permit lawfully, I will explain why you do not want one; because you will need to pay personal income tax to the Indonesian tax man on your worldwide earnings. See: Bali Villas Laws
I will explain what these fraudsters and the corrupt officials they "work with" get up to under feign of professional real estate sales. I will show you that even the squeaky clean estate agents in Bali with International head offices and / or operations are actually squeaking rats who are out to defraud you and make a fast, very dishonest buck. I will give you examples of what will likely to happen to you and your dream Balinese vacation home after you part with your hard earned money that will show you it is all a paradise island nightmare.
The desire by foreigners to own a little slice of what they think is paradise with their own luxury beachfront villa has created a plethora of devious real estate agents, mostly foreigners with some very dubious and often criminal backgrounds ready to defraud you of your money in a country where theft and corruption is the norm; read my warnings!
I will help anyone who is determined to buy into a luxury Balinese holiday villa dream by detailing the safest and totally legal way of making the most of a bad deal for foreigners wanting to get into the vacation home rental market under, or rather outside Indonesian law. My help is free and I neither want nor expect anything in return for it; see ABN Method. My sole aim is to stop foreigners being ripped off as much as I can; I still do not think, even with my advice, investing in Bali's villa industry is worth the risk and heartache. My best advise therefore is do not buy into Bali villas, period; it is all a dangerous nasty con.
Monday, 20 August 2007
Indonesian Property / Land Ownership & Use Laws
The following laws are those bantered around and misquoted by so called real estate companies in Bali with regard to foreign ownership / control over villas on the island. However, the following English interpretations below come not from a villa sales site but from people like a recognized leader in insolvency issues (Insolvency Asia); that is, people who know and report the true law.
Hak Milik (ownership)
This title is the most complete form of ownership of land in Indonesia. The holder can use the land for any purpose whatsoever, including housing. The title may only be held by individuals of Indonesian nationality and special legal bodies stipulated in Govt. Reg No. 38 of 1963 Regarding the Appointment of Indonesian Legal Entities Which May Obtain Land with a Right of Ownership (June 9, 1963). These legal entities are govt banks, cooperatives, religious and social bodies. Consequently, Indonesian legal entities, foreigners and foreign legal entities cannot obtain land with a Hak Milik title
Hak Pakai (right to use)
This right gives the holder the right to use a plot of land and obtain the produce from such land. Land on which a Hak Pakai can be bestowed includes state land, land under a Hak Pengelolaan title and land under an Hak Milik title. This right can be held by Indonesian citizens, Indonesian legal entities (including Foreign Capital Investment Companies or “PMA’s”), and by both resident foreigners and foreign companies with representatives in Indonesia. The duration of a Hak Pakai is for 25 years* and may be extended for a further 20 years* or for an unlimited time, depending on the project concerned.
Hak Guna Bangunan (right to build)
The holder of this title is entitled to erect buildings on the land. The title is granted for an initial period of 30 years*, which may be extended for a further 20 years* and thereafter can be renewed, as long as the use of the land is in accordance with applicable zoning regulations. Indonesian individuals and Indonesian legal entities, including “PMA’s”, may hold this title. NB: Duration* times may now vary
Hak Milik (ownership)
This title is the most complete form of ownership of land in Indonesia. The holder can use the land for any purpose whatsoever, including housing. The title may only be held by individuals of Indonesian nationality and special legal bodies stipulated in Govt. Reg No. 38 of 1963 Regarding the Appointment of Indonesian Legal Entities Which May Obtain Land with a Right of Ownership (June 9, 1963). These legal entities are govt banks, cooperatives, religious and social bodies. Consequently, Indonesian legal entities, foreigners and foreign legal entities cannot obtain land with a Hak Milik title
Hak Pakai (right to use)
This right gives the holder the right to use a plot of land and obtain the produce from such land. Land on which a Hak Pakai can be bestowed includes state land, land under a Hak Pengelolaan title and land under an Hak Milik title. This right can be held by Indonesian citizens, Indonesian legal entities (including Foreign Capital Investment Companies or “PMA’s”), and by both resident foreigners and foreign companies with representatives in Indonesia. The duration of a Hak Pakai is for 25 years* and may be extended for a further 20 years* or for an unlimited time, depending on the project concerned.
Hak Guna Bangunan (right to build)
The holder of this title is entitled to erect buildings on the land. The title is granted for an initial period of 30 years*, which may be extended for a further 20 years* and thereafter can be renewed, as long as the use of the land is in accordance with applicable zoning regulations. Indonesian individuals and Indonesian legal entities, including “PMA’s”, may hold this title. NB: Duration* times may now vary
The "new" (2004) foreign ownership Bali villa real estate lie / con
In a never ending need to tell semi-plausible lies in order to con foreigners out of their money in return for a commission check / cheque, Bali low life expatriate crooks on the run from other countries now abuse a "new" (2004 they say) law; be warned, it is a total con.
This civil code they abuse comes from the Indonesian Minister for Land Registration (“Agraria”) No. 7 of 1996 (RMA 7/96): Article 1(1) which states that "a foreigner whose presence in Indonesia gives opportunities for national development" may own a property under Hak Pakai, and Article 1(2) says such a foreigner is one who "has and maintains an economic interest in Indonesia by implementing an investment in the ownership of (that property)”.
The apparent ambiguity in the above and a letter from the same former Minster for Agraria which accompanied the civil code (as a separate letter it is not in itself legally binding in the courts) way back in 1996 has given rise to claims by the villas sales fraternity that any foreigner can “own” or rather have right of use ownership of a villa in Bali. For balance and clarity here is what the element of the letter said relating to foreign ownership aspects of the civil code, “a foreigner will qualify for Hak Pakai even if he is in Indonesia only from time to time".
However in reality other Indonesian laws contradict what the villa sales people say, in that any foreigner who is Indonesia for more than 2 months in any 12 month period has to register for taxes (Law Number 17/2000). In addition only Indonesian citizens and private Indonesian companies (of which all directors have to be Indonesian) can realistically and legally apply for operational permits for single unit villas intended to be rented out; Public companies which can include minority foreign shareholder directors can also obtain operational permits, but the cost and effort in setting up a publicly listed company in Indonesia just for a villa is a practical nonsense.
The term "national development" in RMA 7/96 (“a foreigner whose presence in Indonesia gives opportunities for national development”) is clearly defined within Indonesian government’s strict guidelines on what foreign expertise is required for the development of the country under the RPTKA "Expatriate Placement Plan" (covers specific positions which foreigners can be employed in plus what experience and qualification minimums they are required to have in order to qualify for KITAS work permits); villa “ownership” / investment and / or operation needless to say is not included in these. Even without the legally defining RPTKA, it is clear "national development" would necessitate some distinct form of commercial or educational benefit to the nation, but this also therefore excludes rental villas because operational permit regulations required to operate these are not available to foreigners.
Although KITAS work and IKTA residency permits are currently fairly easily obtained by villa sales companies for their customers; this is done by way of false declarations on the application form plus a bribe to immigration officers (corruption); these visas are therefore invalid and their holders may be liable for criminal charges for falsifying their applications. KITAS applications require foreigners to be qualified for the position for which they are intending and that no Indonesian is readily or easily available to perform those duties. The qualification is nothing to do with investment; it is to do with a real job being available which no Indonesian is available to perform and where the foreign applicant has the employment history to qualify them for the position. There is absolutely no aspect of single domestic or rental villa operations which would qualify a foreigner for a KITAS and therefore for property right to use.
What about the retired and / or well off? Do they legally benefit from / qualify under RMA 7/96? No! Residency permits do not allow the holder to work in Indonesia, so they can not benefit from RMA 7/96 on the basis of villa investment alone. Retirement visas are different and do not allow the holders to work or conduct business in Indonesia; so they are also are not able to benefit from RMA 7/96.
It is clear regarding RMA 7/96 therefore that;
a) Only foreigners who are registered in Indonesia for tax (which means declaring and paying income tax on their worldwide earnings) qualify under RMA 7/96.
b) Only foreigners of working age who legally meet the KITAS visa criteria (which can not legally include anything to do with the villa itself) qualify under RMA 7/96.
c) No foreigner, even if they meet the above 2 criteria can rent their villa out as a holiday let when they are not using it themselves.
The way that villa sales companies present RMA 7/96 is therefore fraudulent. What makes it worse is their fraudulent acts get comical when you consider just how many Bali real estate sites talk about the "New 2004 Hak Milak law allowing foreigners to own / have right of use to a villa". You then read on to find out they are in fact referring to RMA 7/96 of 1996 but do not explain what it is because they do not know! The reason for these false 2004 statements is that a court in Bali upheld a foreigners claimed right to use a property after his greedy Balinese girlfriend tried to take over the villa. How much money was paid to the judge to get this unlawful ruling no one knows or is saying! But even if the decision was not corruptly made it does not affect the law as there is no case law in Indonesia, which means the decision of one court case in Indonesia can not be used to influence another. At any rate, there was absolutely no new law in 2004 regarding this in Bali and in fact certain limited regional controls (regarding agreement duration) over Hak Milak agreements have since been removed by Jakarta. If anything, Hak Milak is tighter now than before 2004.
Do not let the Bali real estate fraudsters fool you; Balinese villa ownership is not possible for everyday foreigners and will ultimately likely only bring you tears of sorrow, not joy. The only method which can give you legal rights over a villa in Bali are described here: ABN Method.
This civil code they abuse comes from the Indonesian Minister for Land Registration (“Agraria”) No. 7 of 1996 (RMA 7/96): Article 1(1) which states that "a foreigner whose presence in Indonesia gives opportunities for national development" may own a property under Hak Pakai, and Article 1(2) says such a foreigner is one who "has and maintains an economic interest in Indonesia by implementing an investment in the ownership of (that property)”.
The apparent ambiguity in the above and a letter from the same former Minster for Agraria which accompanied the civil code (as a separate letter it is not in itself legally binding in the courts) way back in 1996 has given rise to claims by the villas sales fraternity that any foreigner can “own” or rather have right of use ownership of a villa in Bali. For balance and clarity here is what the element of the letter said relating to foreign ownership aspects of the civil code, “a foreigner will qualify for Hak Pakai even if he is in Indonesia only from time to time".
However in reality other Indonesian laws contradict what the villa sales people say, in that any foreigner who is Indonesia for more than 2 months in any 12 month period has to register for taxes (Law Number 17/2000). In addition only Indonesian citizens and private Indonesian companies (of which all directors have to be Indonesian) can realistically and legally apply for operational permits for single unit villas intended to be rented out; Public companies which can include minority foreign shareholder directors can also obtain operational permits, but the cost and effort in setting up a publicly listed company in Indonesia just for a villa is a practical nonsense.
The term "national development" in RMA 7/96 (“a foreigner whose presence in Indonesia gives opportunities for national development”) is clearly defined within Indonesian government’s strict guidelines on what foreign expertise is required for the development of the country under the RPTKA "Expatriate Placement Plan" (covers specific positions which foreigners can be employed in plus what experience and qualification minimums they are required to have in order to qualify for KITAS work permits); villa “ownership” / investment and / or operation needless to say is not included in these. Even without the legally defining RPTKA, it is clear "national development" would necessitate some distinct form of commercial or educational benefit to the nation, but this also therefore excludes rental villas because operational permit regulations required to operate these are not available to foreigners.
Although KITAS work and IKTA residency permits are currently fairly easily obtained by villa sales companies for their customers; this is done by way of false declarations on the application form plus a bribe to immigration officers (corruption); these visas are therefore invalid and their holders may be liable for criminal charges for falsifying their applications. KITAS applications require foreigners to be qualified for the position for which they are intending and that no Indonesian is readily or easily available to perform those duties. The qualification is nothing to do with investment; it is to do with a real job being available which no Indonesian is available to perform and where the foreign applicant has the employment history to qualify them for the position. There is absolutely no aspect of single domestic or rental villa operations which would qualify a foreigner for a KITAS and therefore for property right to use.
What about the retired and / or well off? Do they legally benefit from / qualify under RMA 7/96? No! Residency permits do not allow the holder to work in Indonesia, so they can not benefit from RMA 7/96 on the basis of villa investment alone. Retirement visas are different and do not allow the holders to work or conduct business in Indonesia; so they are also are not able to benefit from RMA 7/96.
It is clear regarding RMA 7/96 therefore that;
a) Only foreigners who are registered in Indonesia for tax (which means declaring and paying income tax on their worldwide earnings) qualify under RMA 7/96.
b) Only foreigners of working age who legally meet the KITAS visa criteria (which can not legally include anything to do with the villa itself) qualify under RMA 7/96.
c) No foreigner, even if they meet the above 2 criteria can rent their villa out as a holiday let when they are not using it themselves.
The way that villa sales companies present RMA 7/96 is therefore fraudulent. What makes it worse is their fraudulent acts get comical when you consider just how many Bali real estate sites talk about the "New 2004 Hak Milak law allowing foreigners to own / have right of use to a villa". You then read on to find out they are in fact referring to RMA 7/96 of 1996 but do not explain what it is because they do not know! The reason for these false 2004 statements is that a court in Bali upheld a foreigners claimed right to use a property after his greedy Balinese girlfriend tried to take over the villa. How much money was paid to the judge to get this unlawful ruling no one knows or is saying! But even if the decision was not corruptly made it does not affect the law as there is no case law in Indonesia, which means the decision of one court case in Indonesia can not be used to influence another. At any rate, there was absolutely no new law in 2004 regarding this in Bali and in fact certain limited regional controls (regarding agreement duration) over Hak Milak agreements have since been removed by Jakarta. If anything, Hak Milak is tighter now than before 2004.
Do not let the Bali real estate fraudsters fool you; Balinese villa ownership is not possible for everyday foreigners and will ultimately likely only bring you tears of sorrow, not joy. The only method which can give you legal rights over a villa in Bali are described here: ABN Method.
Nominee / name giver - the biggest Bali villa con
The Totally Unlawful Nominee Agreement Con
Most villa sales companies use the unlawful nominee agreement con to get you to "invest" in a Bali villa where they earn a nice big fat commission for lying to you and the chance to defraud you out of every penny you take to Bali.
Bali real estate companies advertise "freehold" land and / or villas to foreigners on the basis the freehold is held by a "nominee" or "name giver"; basically you will be taken on a ride which will then remove all the money from your bank account and leave you with no legals rights or redress at all.
These foreign expatriate crooks who pose as ethical real estate agents tell you this is a proven and legal method, when it is not. Basically a "nominee" or "name giver" agreement is where you pay for everything but the land and villa goes in an Indonesian's name (they own the land and villa) and you get a worthless piece of paper.
The piece of paper is an agreement from the "nominee" / "name giver" is an agreement to give you full use and access rights to the villa and land. The trouble is, this is a contrived and deliberate circumvention of clearly defined Indonesian laws governing foreign ownership and rights to use land / villas; that's right, nominee / name giver contracts are totally unlawful and are not worth the paper they are written on.
Although the corrupt Indonesian authorities (Transparency International ranks them as one of the most corrupt in the world) know this goes on and have not done anything about it yet, they can easily nullify each and every nominee / name-giver agreement just by enforcing existing laws. The only realistic legal way for a foreigner to control a villa in Bali is described here: ABN Method
Most villa sales companies use the unlawful nominee agreement con to get you to "invest" in a Bali villa where they earn a nice big fat commission for lying to you and the chance to defraud you out of every penny you take to Bali.
Bali real estate companies advertise "freehold" land and / or villas to foreigners on the basis the freehold is held by a "nominee" or "name giver"; basically you will be taken on a ride which will then remove all the money from your bank account and leave you with no legals rights or redress at all.
These foreign expatriate crooks who pose as ethical real estate agents tell you this is a proven and legal method, when it is not. Basically a "nominee" or "name giver" agreement is where you pay for everything but the land and villa goes in an Indonesian's name (they own the land and villa) and you get a worthless piece of paper.
The piece of paper is an agreement from the "nominee" / "name giver" is an agreement to give you full use and access rights to the villa and land. The trouble is, this is a contrived and deliberate circumvention of clearly defined Indonesian laws governing foreign ownership and rights to use land / villas; that's right, nominee / name giver contracts are totally unlawful and are not worth the paper they are written on.
Although the corrupt Indonesian authorities (Transparency International ranks them as one of the most corrupt in the world) know this goes on and have not done anything about it yet, they can easily nullify each and every nominee / name-giver agreement just by enforcing existing laws. The only realistic legal way for a foreigner to control a villa in Bali is described here: ABN Method
PMA’s (Penanaman Modal Asing) Foreign Direct Investment Companies & Villas
Up market luxury Bali villa sales agents ply the PMA (Penanaman Modal Asing) or Foreign Direct Investment company route. They set wealthy foreigners up with PMA’s in their names and manage these companies and their villas for them. PMA’s can enjoy Hak Pakai rights over a property, true, but the way villas are sold and PMA’s are applied for, it is not legally possible for someone to sell another person a villa (or have them invest in it individually), even if that villa is not built yet, on the basis of a PMA.
The reason for this is that foreigners have to apply for Indonesian PMA’s and the procedures are very involved; critically because you have to submit investment and trading plans to The Indonesian Investment Coordinating Board (BKPM). If you are buying a villa, even if the villa has not been built yet, you are buying someone else’s preexisting investment / operational plans. Also, most of the villa sales agents conscript their customers into their management services for property maintenance, cleaning, services, etc. which means the only thing left to do by the foreigner is stay at the property and enjoy a share of any rental income; these are not grounds for a lawfully made PMA application of course. Although BKPM’s can be bribed to overlook certain facts like any other Indonesian government office, the PMA route is fraught with risk as a) the “investor” (villa buyer) is generally beholden to the villa sales and management company, plus are reliant on their continued "good standing" with local officials, b) PMA’s are initially licensed for just 3 years, c) PMA’s bring “investors” within the jurisdiction of the Indonesian tax man on their worldwide earnings as obtaining a KITAS for your key foreigner work permits is a prerequisite and within the initial 3 year term.
PMA's are therefore not an option unless you are the original project manager from initial planning, to land acquisition, to building permits, to the actual construction, to the hiring of staff, to the obtaining of operational permits and more. The only realistic legal way for a foreigner to control a villa in Bali is described here: ABN Method
In addition, be warned; PMA owned villas are also flags to the local corrupt authorities that the foreign “owner” / investor in that villa is very wealthy.
The reason for this is that foreigners have to apply for Indonesian PMA’s and the procedures are very involved; critically because you have to submit investment and trading plans to The Indonesian Investment Coordinating Board (BKPM). If you are buying a villa, even if the villa has not been built yet, you are buying someone else’s preexisting investment / operational plans. Also, most of the villa sales agents conscript their customers into their management services for property maintenance, cleaning, services, etc. which means the only thing left to do by the foreigner is stay at the property and enjoy a share of any rental income; these are not grounds for a lawfully made PMA application of course. Although BKPM’s can be bribed to overlook certain facts like any other Indonesian government office, the PMA route is fraught with risk as a) the “investor” (villa buyer) is generally beholden to the villa sales and management company, plus are reliant on their continued "good standing" with local officials, b) PMA’s are initially licensed for just 3 years, c) PMA’s bring “investors” within the jurisdiction of the Indonesian tax man on their worldwide earnings as obtaining a KITAS for your key foreigner work permits is a prerequisite and within the initial 3 year term.
PMA's are therefore not an option unless you are the original project manager from initial planning, to land acquisition, to building permits, to the actual construction, to the hiring of staff, to the obtaining of operational permits and more. The only realistic legal way for a foreigner to control a villa in Bali is described here: ABN Method
In addition, be warned; PMA owned villas are also flags to the local corrupt authorities that the foreign “owner” / investor in that villa is very wealthy.
YES, there is one viable Legal Balinese villa option for foreigners, the ABN method
How to set up a legal villa operation in Bali as a foreigner without putting yourself at risk with the corrupt or otherwise Indonesian authorities and / or having to register for tax / residency in Indonesia. Please note, this is personal opinion and you need to verify its accuracy for yourself / your circumstances / your country with an appropriate legal advisor there and in Bali. My only objective in sharing this method with you is to put you as much as possible out of the reach of Bali's very nasty and notoriously corrupt police and immigration. This is the same method I basically once used when I was unfortunate and stupid enough to invest in my own Bali villas; never again! If you use this method or variation of it, all I require is that wherever you have your villa(s) advertised for rentals, you state you are using this method by name (see end for details).
Legal Bali Villa “Ownership” / Investment and Rental Income Return for foreigners.
1) Form a company in your home country whose operational mandate extends to;
a) Lending money overseas
b) Providing villa design, construction, operation and marketing services
c) Providing reservation services
It would be better to give your company an appropriate name such as “International villa management, Ltd.”
2) Whenever you want to go to Bali which will involve any business relating to your intended villa project, apply for a business visa from the nearest Indonesian Embassy. Some visa agents can get you a multi-entry visa if you intend making a number of visits over a short time, but make sure the visa submission is 100% accurate, not made using any falsehoods. This will give you the right to discuss all aspects of your foreign company’s operations with your intended business partners in Bali and protect you against retrospective extortion / legal action by the Balinese police and immigration.
3) You will need a truly trustworthy Indonesian friend to own the land in Bali (Hak Milik ownership). You will also need at least one other Indonesian to set up a company in Bali, a “PT”, which can be used to contract the land legally (Hak Pakai right of use) from the intended land owner (you friend). It makes sense for the friend to also be the CEO of the PT company which needs to be formed ASAP / before you do anything else.
4) Decide on what you want to buy and where; buying land to build a new villa on or buying land with a villa already on it. Make 110% sure that building permits for new villa projects are available if you intend building a new villa design and that your will would qualify within the local building regulations at that location (which cover all sorts of things from environmental to religious). If you are buying an existing villa make sure it had a building permit prior to construction commencing (many villas did not and are therefore unlawful) and that all building regulation were met. In both cases make sure there are no land title disputes for the plot of land. This is called “due diligence” and should be carried out by a recognized specialist. Determine the current maximum initial and extension periods in law for a Hak Pakai agreement.
5) When you know the land / villa you wish to buy / invest in, get your friend back to your own country and have them enter into agreements with you there under your own country’s jurisdiction. Do not be tempted to simply have your friend sign an agreement in Indonesia which says jurisdiction will be in your own country. You should physically have them sign everything in your country and get copies of their passport and immigration stamps to show they were there at the date of signing. You should also get a letter (signed by all directors) from the Indonesian PT you / they have set up to acknowledge the purpose of their trip is to secure funding and set up International marketing and reservation agreements with your foreign company, and also giving them authority to sign such agreements while they are there on behalf of the PT. The agreements you need them to sign are;
a) A loan agreement between your company and the Indonesian PT, guaranteed by the Indonesian friend personally for all the money required for the project. Use a standard but higher end fixed rate of interest. Include in the agreement exactly what the money is to be used for, and nothing else, unless agreed by you first in writing. Set the term of the agreement to be the maximum initial term of a Balinese Hak Pakai agreement. Put into the agreement provisions for non-payment of any or the full amount by the end of the term. Typically this provision would include a renewal clause if the total amount plus due interest is not paid back to your company within the initial term; this should be specified as the then current maximum renewal / extension option for Balinese Hak Pakai agreements; so that if you get paid back the capital plus good interest within the initial term, then the loan is repaid, but if you / they are so much as a dollar short, it then gets renewed.
Your loan agreement with the PT should include provision and definition for the agreements they will need to legally enter into with your Indonesian friend personally in Bali. Irrespective of whether you are going to build a new villa or are buying one that already exists, only the land should end up in your friend’s personal name; this may well mean he has to buy the land and an existing villa in his name and then sell the villa to the PT for a nominal amount.
Include in your agreement the right for your friend to pay off the loan at (not by) the end of the initial loan agreement term (to correspond with the Hak Pakai term) as is right and fair. Include in the agreement that if they do not so repay the loan amount plus agreed interest back on the exact very last day of the initial term, everything will renew for another period equal to then maximum allowed for Indonesian Hak Pakai agreements at that time.
b) An agreement (for as long as you like / are legally able to) between your company and the Indonesian PT giving your company the full marketing and reservation coordinating rights to the PT and the villa(s). That is, your company has the sole marketing and reservation rights; so you decide who (which agents) offers the villa for rent and which people stay at your villas. Include a commission agreement and, if you like, marketing fee agreement. For example, your company gets 30% commission on every guest booking which you have to handle and are entitled to take in advance from the guests as a deposit for their stay; so you take their deposits and keep it. Be aware the villas will need to pay tax locally (currently 10%), so you will need to set the rates, as per your marketing agreement to include this but the deposit your company takes will not be able to take a commission of this. So the commission / deposit you take will need to be on the gross amount. For example, you decide you wish to charge US$100 a night plus tax (plus service charges if you wish). If your agreement is for 30% commission and someone wants to stay 10 nights (total US$1000 plus tax and service charge), you would take just US$300 deposit / commission. The guest would pay the remaining US$700 PLUS 10% tax (plus any service charge you ask for) on the whole US$1000 at the villas.
Include in your marketing and reservation agreements the right for 2 months (minimum) complimentary accommodation for designated directors (you) and family of your company. Why 2 months? Because if you stay in Bali any more than that, the Indonesian authorities can and will deem you to be an unlawful resident; this could mean either being deported or being required to become legally resident and pay personal taxation in Indonesia on your worldwide income (not good). That is right; currently you should only spend a maximum 2 months in any 12 month period in Bali / Indonesia as a non-registered / resident foreigner. If you intend to allow friends and family without you being present to use the villa(s), you can make the complimentary accommodation period longer of course just as long as no one person stays in Indonesia longer than the current minimum used to determine whether they are legally are resident or not.
c) You need your friend to sign a personal agreement. Include in this agreement the fact your Indonesian friend contracts to work for the Indonesian PT company for the same (Hak Pakai) initial term as the operations director for which they will receive a salary (specified with provision to rise perhaps according to percentage rises in the Indonesian minimum basic wage) plus bonuses for performance / profit share. Make it a condition that if they terminate their contract prematurely they agree to hand over title to the villa(s) / land to a new (Indonesian) owner of your designation for a nominal amount. Specify that the friend is going to receive funding from the Indonesian PT you have set up to buy the land and villa (if appropriate) in their name for the same term and interest rate as between your foreign company and the PT. Specify that if they repay the full amount plus interest by the end of the term, the land is theirs without lien, claim or charge but that they acknowledge they will not own the villa(s) / anything on the land at such a time / event. Include in the agreement that if your friend repays the loan to them from the PT within the initial term, they agree to allow the PT and villas to operate for the minimum extension period allowed by Hak Pakai at the end of the initial term for a nominal (specified amount). Also include that of your friend does not make full repayment during the initial term, they are able to do this in any subsequent extension / renewal term if they wish to on the basis they will allow the PT use of the land for the same nominal amount for the next / following extension / renewal period.
Have your agreements signed and notarized in your home country.
6) Under business visa go to Bali and also have the papers translated into Indonesian (by a qualified and registered English to Indonesian translator, not anyone else), signed, notarized and recorded as charges / liens against the land, friend and Indonesian company. Also draw up the agreements between your friend and the PT you have formed specifically regarding the employment, loan and actual Hak Pakai agreement between them to reflect what you already have agreed outside Indonesia. Transfer the money to the Indonesian company. The Indonesian company then transfers what it needs to your Indonesian friend in return for the “Hak Pakai” agreement. Make sure the PT registers for tax and obtains all necessary permits, including operational permit for accommodations before you accept your first paying guest.
7) Your foreign company controls the marketing (so any rental agents you appoint have to pay you the deposit overseas) and reservations allowing you to legally take the deposit as commission whenever someone books with you. All you have to do is obtain Indonesian business visas if you want to be involved in the villas operation (stress: indirectly through the PT) while you are in Bali; this will cover you for even taking reservations while you are there because you are doing this for your foreign company. You get the maximum time allowed by Indonesian immigration law to be able to stay in Bali without becoming a resident. If the villas make a profit, the PT can legally pay you this money as loan repayments. If you make a lot of money and your bonus scheme for your Indonesian friend was generous enough, they will be able top afford to pay off their personal loan one day and own the land outright without any lien or charge (you will still be entitled to, at the very least / minimum, the next Hak Pakai renewal period and are of course free to negotiate what happens at the end of that with your friend.
This method is called the "ABN method". The date of it being published has been recorded / documented. Anyone is free to use this method (or variation thereof) as long as they place / ensure are placed on any and all web pages offering accommodation rentals for villas the expression / link "ABN Method", such as "These villas have been legally set up using the ABN Method". Villa sales agents may likewise use this method to help their customers again as long as they make a prominent link (not robots limited in any way) / reference on their main page and any appropriate villa sales page that they are offering the villa for sale / investment using the "ABN Method". The link syntax for this is ABN Method. You may use the ABN method or variation thereof without displaying the reference / expression / link for US$1,000,000.
Legal Bali Villa “Ownership” / Investment and Rental Income Return for foreigners.
1) Form a company in your home country whose operational mandate extends to;
a) Lending money overseas
b) Providing villa design, construction, operation and marketing services
c) Providing reservation services
It would be better to give your company an appropriate name such as “International villa management, Ltd.”
2) Whenever you want to go to Bali which will involve any business relating to your intended villa project, apply for a business visa from the nearest Indonesian Embassy. Some visa agents can get you a multi-entry visa if you intend making a number of visits over a short time, but make sure the visa submission is 100% accurate, not made using any falsehoods. This will give you the right to discuss all aspects of your foreign company’s operations with your intended business partners in Bali and protect you against retrospective extortion / legal action by the Balinese police and immigration.
3) You will need a truly trustworthy Indonesian friend to own the land in Bali (Hak Milik ownership). You will also need at least one other Indonesian to set up a company in Bali, a “PT”, which can be used to contract the land legally (Hak Pakai right of use) from the intended land owner (you friend). It makes sense for the friend to also be the CEO of the PT company which needs to be formed ASAP / before you do anything else.
4) Decide on what you want to buy and where; buying land to build a new villa on or buying land with a villa already on it. Make 110% sure that building permits for new villa projects are available if you intend building a new villa design and that your will would qualify within the local building regulations at that location (which cover all sorts of things from environmental to religious). If you are buying an existing villa make sure it had a building permit prior to construction commencing (many villas did not and are therefore unlawful) and that all building regulation were met. In both cases make sure there are no land title disputes for the plot of land. This is called “due diligence” and should be carried out by a recognized specialist. Determine the current maximum initial and extension periods in law for a Hak Pakai agreement.
5) When you know the land / villa you wish to buy / invest in, get your friend back to your own country and have them enter into agreements with you there under your own country’s jurisdiction. Do not be tempted to simply have your friend sign an agreement in Indonesia which says jurisdiction will be in your own country. You should physically have them sign everything in your country and get copies of their passport and immigration stamps to show they were there at the date of signing. You should also get a letter (signed by all directors) from the Indonesian PT you / they have set up to acknowledge the purpose of their trip is to secure funding and set up International marketing and reservation agreements with your foreign company, and also giving them authority to sign such agreements while they are there on behalf of the PT. The agreements you need them to sign are;
a) A loan agreement between your company and the Indonesian PT, guaranteed by the Indonesian friend personally for all the money required for the project. Use a standard but higher end fixed rate of interest. Include in the agreement exactly what the money is to be used for, and nothing else, unless agreed by you first in writing. Set the term of the agreement to be the maximum initial term of a Balinese Hak Pakai agreement. Put into the agreement provisions for non-payment of any or the full amount by the end of the term. Typically this provision would include a renewal clause if the total amount plus due interest is not paid back to your company within the initial term; this should be specified as the then current maximum renewal / extension option for Balinese Hak Pakai agreements; so that if you get paid back the capital plus good interest within the initial term, then the loan is repaid, but if you / they are so much as a dollar short, it then gets renewed.
Your loan agreement with the PT should include provision and definition for the agreements they will need to legally enter into with your Indonesian friend personally in Bali. Irrespective of whether you are going to build a new villa or are buying one that already exists, only the land should end up in your friend’s personal name; this may well mean he has to buy the land and an existing villa in his name and then sell the villa to the PT for a nominal amount.
Include in your agreement the right for your friend to pay off the loan at (not by) the end of the initial loan agreement term (to correspond with the Hak Pakai term) as is right and fair. Include in the agreement that if they do not so repay the loan amount plus agreed interest back on the exact very last day of the initial term, everything will renew for another period equal to then maximum allowed for Indonesian Hak Pakai agreements at that time.
b) An agreement (for as long as you like / are legally able to) between your company and the Indonesian PT giving your company the full marketing and reservation coordinating rights to the PT and the villa(s). That is, your company has the sole marketing and reservation rights; so you decide who (which agents) offers the villa for rent and which people stay at your villas. Include a commission agreement and, if you like, marketing fee agreement. For example, your company gets 30% commission on every guest booking which you have to handle and are entitled to take in advance from the guests as a deposit for their stay; so you take their deposits and keep it. Be aware the villas will need to pay tax locally (currently 10%), so you will need to set the rates, as per your marketing agreement to include this but the deposit your company takes will not be able to take a commission of this. So the commission / deposit you take will need to be on the gross amount. For example, you decide you wish to charge US$100 a night plus tax (plus service charges if you wish). If your agreement is for 30% commission and someone wants to stay 10 nights (total US$1000 plus tax and service charge), you would take just US$300 deposit / commission. The guest would pay the remaining US$700 PLUS 10% tax (plus any service charge you ask for) on the whole US$1000 at the villas.
Include in your marketing and reservation agreements the right for 2 months (minimum) complimentary accommodation for designated directors (you) and family of your company. Why 2 months? Because if you stay in Bali any more than that, the Indonesian authorities can and will deem you to be an unlawful resident; this could mean either being deported or being required to become legally resident and pay personal taxation in Indonesia on your worldwide income (not good). That is right; currently you should only spend a maximum 2 months in any 12 month period in Bali / Indonesia as a non-registered / resident foreigner. If you intend to allow friends and family without you being present to use the villa(s), you can make the complimentary accommodation period longer of course just as long as no one person stays in Indonesia longer than the current minimum used to determine whether they are legally are resident or not.
c) You need your friend to sign a personal agreement. Include in this agreement the fact your Indonesian friend contracts to work for the Indonesian PT company for the same (Hak Pakai) initial term as the operations director for which they will receive a salary (specified with provision to rise perhaps according to percentage rises in the Indonesian minimum basic wage) plus bonuses for performance / profit share. Make it a condition that if they terminate their contract prematurely they agree to hand over title to the villa(s) / land to a new (Indonesian) owner of your designation for a nominal amount. Specify that the friend is going to receive funding from the Indonesian PT you have set up to buy the land and villa (if appropriate) in their name for the same term and interest rate as between your foreign company and the PT. Specify that if they repay the full amount plus interest by the end of the term, the land is theirs without lien, claim or charge but that they acknowledge they will not own the villa(s) / anything on the land at such a time / event. Include in the agreement that if your friend repays the loan to them from the PT within the initial term, they agree to allow the PT and villas to operate for the minimum extension period allowed by Hak Pakai at the end of the initial term for a nominal (specified amount). Also include that of your friend does not make full repayment during the initial term, they are able to do this in any subsequent extension / renewal term if they wish to on the basis they will allow the PT use of the land for the same nominal amount for the next / following extension / renewal period.
Have your agreements signed and notarized in your home country.
6) Under business visa go to Bali and also have the papers translated into Indonesian (by a qualified and registered English to Indonesian translator, not anyone else), signed, notarized and recorded as charges / liens against the land, friend and Indonesian company. Also draw up the agreements between your friend and the PT you have formed specifically regarding the employment, loan and actual Hak Pakai agreement between them to reflect what you already have agreed outside Indonesia. Transfer the money to the Indonesian company. The Indonesian company then transfers what it needs to your Indonesian friend in return for the “Hak Pakai” agreement. Make sure the PT registers for tax and obtains all necessary permits, including operational permit for accommodations before you accept your first paying guest.
7) Your foreign company controls the marketing (so any rental agents you appoint have to pay you the deposit overseas) and reservations allowing you to legally take the deposit as commission whenever someone books with you. All you have to do is obtain Indonesian business visas if you want to be involved in the villas operation (stress: indirectly through the PT) while you are in Bali; this will cover you for even taking reservations while you are there because you are doing this for your foreign company. You get the maximum time allowed by Indonesian immigration law to be able to stay in Bali without becoming a resident. If the villas make a profit, the PT can legally pay you this money as loan repayments. If you make a lot of money and your bonus scheme for your Indonesian friend was generous enough, they will be able top afford to pay off their personal loan one day and own the land outright without any lien or charge (you will still be entitled to, at the very least / minimum, the next Hak Pakai renewal period and are of course free to negotiate what happens at the end of that with your friend.
This method is called the "ABN method". The date of it being published has been recorded / documented. Anyone is free to use this method (or variation thereof) as long as they place / ensure are placed on any and all web pages offering accommodation rentals for villas the expression / link "ABN Method", such as "These villas have been legally set up using the ABN Method". Villa sales agents may likewise use this method to help their customers again as long as they make a prominent link (not robots limited in any way) / reference on their main page and any appropriate villa sales page that they are offering the villa for sale / investment using the "ABN Method". The link syntax for this is ABN Method. You may use the ABN method or variation thereof without displaying the reference / expression / link for US$1,000,000.
Beachfront Lovina North Balinese Sales
Of all the crooked dodgy foreign expats selling Bali villas real estate, I think Bert Vierstra up in Lovina takes centre podium place. I say his clearly advertising freehold properties to English, Mandarin Chinese, Japanese, Russian, French, Dutch, German and Spanish speaking foreigners, the North Bali Real Estate company run by Vierstra is not just committing multi-lingual fraud (because foreigners absolutely can not own land or luxury holiday villas, beachfront, ocean view or otherwise), but Vierstra is also an alleged pedophile (see: Bert Vierstra Lovina Bali)!
Realtor and villa sales agent Bert also has been caught out doing some nasty things in Bali and on the Internet, such as;
1) Accusing a charity worker of stealing from a children's charity when he had not.
2) Trying to hack (deface) a competitor's web site and then claimed that competitor hacked his (when estate agent Vierstra simply forgot to renew his web hosting package and it got deleted)!
3) Circulating passport scans, obtained illicitly of course, of someone he has a grudge against.
Would you buy a luxury beach-front villa in Bali you can not ever own and from a man as dodgy and fraudulent as I believe Bert Vierstra has proven himself to be countless times?
Realtor and villa sales agent Bert also has been caught out doing some nasty things in Bali and on the Internet, such as;
1) Accusing a charity worker of stealing from a children's charity when he had not.
2) Trying to hack (deface) a competitor's web site and then claimed that competitor hacked his (when estate agent Vierstra simply forgot to renew his web hosting package and it got deleted)!
3) Circulating passport scans, obtained illicitly of course, of someone he has a grudge against.
Would you buy a luxury beach-front villa in Bali you can not ever own and from a man as dodgy and fraudulent as I believe Bert Vierstra has proven himself to be countless times?
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