The structure behind the investment matters. Land rights, zoning, business activities, company structure, licensing, taxation and construction approvals all need to work together. A project can look commercially attractive on paper and still become complicated if one part of the structure does not support the others.
To better understand these issues, Aterra recently sat down with Terje of Seven Stones, our legal partner, to discuss what foreign investors need to understand when buying or developing property in Bali and Indonesia.
What became clear from the conversation is that there is no single “foreigner property structure”. There is a system — and understanding how the pieces fit together is where the real due diligence begins.
01. The first question is not “What property can I buy?”
It is:
What legal interest can I actually hold?
One of the most common misunderstandings around Indonesian property is the idea that a foreigner simply buys “freehold” property in the same way they might in another country.
Indonesia's land system is different.
Hak Milik, the Indonesian freehold title, is generally reserved for Indonesian citizens. By contrast, Hak Guna Bangunan (HGB) can be held by an Indonesian legal entity, while foreign individuals can hold certain forms of Hak Pakai, subject to the applicable requirements. Long-term lease structures are another route used in the market. Indonesian law specifically recognises HGB as a right that may be held by a legal entity established under Indonesian law and domiciled in Indonesia.
This distinction is fundamental.
A foreign investor therefore needs to understand not only the property itself, but the legal structure sitting underneath the property.
During our discussion, Terje emphasised an important point for foreign buyers: the language used to describe ownership matters. Aterra therefore avoids using the word freehold when explaining Indonesian property ownership to foreign buyers and instead explains the specific legal right being offered.
That may sound like a small distinction.
It is not.
The difference between owning land, holding a registered right over land, holding a lease, and owning shares in a company that holds property rights can fundamentally change the legal and commercial position of an investment.
02. Development starts with the land - but it does not end there
Finding attractive land is only the beginning. Before an architect starts drawing the building, a developer needs to understand whether the proposed development is actually compatible with the site.
That means looking at questions such as:
What is the land status?
What is the permitted use?
Does the zoning support the intended development?
Can the intended business activity legally operate there?
What approvals will be required?
Indonesia's spatial-planning framework regulates land use and includes mechanisms for assessing the conformity of activities with spatial plans. Government Regulation No. 21 of 2021 covers spatial planning, land-use utilisation, control and supervision. For developers, this means the commercial concept and the legal use of the land need to be considered together.
A beautiful site does not automatically make it a suitable development site.
And a project designed for residential living may have a different regulatory position from one intended to operate as a commercial accommodation business.
That is why zoning, business activity and development structure should be examined before design becomes too far advanced.
03. The PT PMA question
For many foreign investors, the conversation eventually reaches one acronym:
PT PMA
A PT PMA is an Indonesian limited liability company with foreign investment.
For an investor intending to operate a commercial business in Indonesia, the company structure can become an important part of the investment architecture.
But a PT PMA is not simply a box you tick to “make a property legal”.
Its business activities need to be structured appropriately, with the relevant KBLI classifications and licensing through Indonesia's OSS system, alongside the requirements applicable to the particular activity and location. And the capital requirements have changed.
Under Minister of Investment and Downstreaming/BKPM Regulation No. 5 of 2025, which replaced the previous BKPM licensing regulations, the general minimum paid-up capital for a PT PMA is now IDR 2.5 billion. Official government investment guidance also distinguishes this from the broader minimum investment requirement applicable to PMA activities.
That change is important because investors who have been researching Indonesia for several years may still encounter the older IDR 10 billion paid-up-capital figure. But lower paid-up capital should not be confused with a lower overall investment requirement. The current framework separates the company's paid-up capital from the investment commitment associated with its registered business activities. The exact requirements can also vary depending on the business field and applicable sector rules.
The important takeaway?
Do not set up a company first and figure out the business model later.
The development concept, land structure, KBLI, licensing and company structure should be considered together.
04. A PT PMA is not the same thing as a KITAS
Another common question is whether a foreign investor needs a KITAS simply to own or operate a PT PMA. Our discussion with Seven Stones highlighted an important distinction: company ownership and immigration status are related areas, but they are not the same legal question.
This matters because foreign investors sometimes approach Indonesian property with the assumption that:
Company = visa = property ownership
In reality, each needs to be examined separately. A person may have a company structure, an investment structure and an immigration position that each have different requirements. For investors living overseas, or investors who intend to spend only part of the year in Indonesia, this distinction becomes particularly important.
It is another reason why company formation should be handled alongside professional legal, tax and immigration advice rather than treated as a standard property-purchase step.
05. Tax is not one number
Perhaps one of the most important lessons from our conversation was that asking:
“What tax do foreigners pay on property?”
is usually the wrong question.
The better question is:
“What tax applies to this particular income, transaction and structure?”
Indonesia's tax system distinguishes between different types of income and transactions.
For example, the Directorate General of Taxes states that income from the rental of land and/or buildings is subject to final income tax at 10% of gross rental value under the applicable rules. Corporate taxation is different again.
Indonesia's general corporate income-tax rate is 22%, while qualifying companies can receive a 50% reduction in the rate for the relevant portion of taxable income under the applicable facility. The Directorate General of Taxes currently describes the effective rate for the qualifying portion as 11%.
This is exactly why property marketing should be careful with phrases such as:
“10% tax.”
“11% corporate tax.”
“20% rental tax.”
Each number can refer to a different tax treatment. The correct treatment depends on what is being earned, who is earning it, how the transaction is structured, and which rules apply to that particular activity.
Even in our Seven Stones discussion, Terje's advice was clear: Aterra should explain general principles but should not turn those figures into personalised tax advice.
That is an important distinction for any professional property company.
06. Tax exists throughout the investment lifecycle
For a property investor, tax is not something that appears only when rental income starts coming in.
It can exist at several stages of the investment:
Acquisition
Transaction-related taxes and costs may apply depending on the structure.
Development
Construction, company operations and project expenses can have different tax treatments.
Operation
Rental income, hospitality income and other operating revenue can fall under different tax regimes.
Sale
The treatment can change again depending on whether the investor is selling property rights, a lease interest, shares or another asset.
Distribution
Moving profits from a company to shareholders can create another layer of tax considerations.
Our discussion with Seven Stones specifically identified several purchase-cost questions — including BPHTB, VAT on off-plan transactions, notary and PPAT fees, and responsibility for those costs — that require deal-specific confirmation rather than a generic figure in a marketing article. This is a good example of why the headline property price is rarely the complete investment picture.
07. Development means understanding permits before construction
Once the land and structure are in place, the next question becomes:
Can you actually build what you have designed?
Indonesia's current building framework uses the Persetujuan Bangunan Gedung (PBG) for building construction. Government Regulation No. 16 of 2021 states that PBG is required for constructing a new building and must be applied for before construction begins.
This is particularly relevant for buyers considering off-plan projects. A rendering is not a permit. A beautifully presented masterplan is not a permit. And a future intention to obtain an approval is not the same as holding the approval today.
For a buyer, the useful question is therefore not simply:
“Does this project have permits?”
It is:
“Which approvals exist today, which are still being processed, and which party is responsible for obtaining them?”
That distinction can materially change the risk profile of an investment.
08. Off-plan investment requires another layer of due diligence
Buying before completion can provide access to a new development, but it also means buying into a process that is still unfolding. There is construction risk. There is approval risk. There is delivery risk. And there is operational risk.
During our conversation, Seven Stones highlighted several mechanisms that can help protect an investor in an off-plan structure. Rather than linking instalments purely to calendar dates, payments can be connected to actual construction milestones. The legal interest associated with the buyer's property should be properly documented.
Independent verification of construction progress can also provide another layer of protection. And, depending on the structure, contracts can address what happens if the developer is unable to complete the project.
This leads to another important principle:
A projected return is not the same thing as a protected return.
Our legal discussion also made a broader point about “guaranteed” returns. A promise from a developer is not equivalent to a guarantee backed by an independent financial institution or insurer.
For Aterra, that distinction matters. We would rather explain the assumptions behind an investment than present a single attractive percentage without context.
09. Due diligence goes beyond the land certificate
A title search is important. But it is only the beginning. Terje described a basic notarial review as covering matters such as zoning, mortgages or encumbrances on the land, and litigation or disputes.
A deeper due-diligence exercise can go further — examining matters such as local community relationships, village and banjar considerations, outstanding land or business taxes, permitting issues and potential objections. For a foreign investor who may be thousands of kilometres away from the property, this layer of investigation becomes even more important.
The question should not only be:
“Is the land real?”
It should be:
“Can this project legally and practically do what we intend it to do?”
That is a much broader question.
10. What does all of this mean for developing in Bali?
For us, the most important lesson from the Seven Stones conversation was not one particular tax rate or company requirement. It was the importance of alignment.
A successful development structure needs several pieces to work together:
Land
The underlying land rights need to be understood and properly documented.
Zoning
The intended use needs to be compatible with the applicable spatial planning framework.
Company
Where a commercial investment requires a company structure, the PT PMA and its activities need to be appropriately established.
KBLI & Licensing
The company's registered business activities and licensing need to align with what the project actually intends to do.
Tax
The tax consequences need to be assessed according to the investment structure and type of income.
Permits
Construction and operational requirements need to be understood before the project reaches the site.
Contracts
The investor needs to understand exactly what they are buying, when they pay, what happens if circumstances change, and what rights they have if something goes wrong.
Development
Only after these foundations are understood should architecture, materials, interiors and the broader development experience take centre stage.
The bigger picture
Bali remains an attractive destination for international capital, but investing here is not about finding the next beautiful piece of land. It is about understanding how land, law, business, tax, design and development come together.
For foreign investors, that can initially make the market feel complicated.
But complexity is not necessarily a reason to step away from a market.
It is a reason to ask better questions.
At Aterra Development, this is increasingly how we think about development.
Before asking “What should we build?”, we need to ask:
Can we build it?
Can we operate it?
Who can legally hold it?
What does the investment structure look like?
What are the risks?
And does the opportunity still make sense once the full picture is understood?
That process may take longer than simply looking at a rendering and a price.
But thoughtful development starts long before construction.
It starts with clarity.
A note from Aterra
This article is based in part on Aterra's September 2026 discussion with Terje of Seven Stones, together with publicly available Indonesian government and tax materials.
The Seven Stones discussion was intended to help Aterra's advisors understand general principles. It is not a substitute for legal, tax, immigration or investment advice. Deal-specific structures, tax positions, permits, ownership arrangements and transaction costs should be reviewed by qualified professionals before a commitment is made. A number of detailed questions from the September session were also still awaiting written confirmation from Seven Stones.
