This is the fifth in a series of six posts that looks at issues raised a year ago by Terje H. Nilsen, co-owner of Seven Stones Indonesia, in a blog entitled “What’s Wrong With Real Estate in Bali?”

The fifth issue we’re looking at today is about Ownership Structures for Expats.

What Terje spoke about last year was the buzz around the nominee structure, which, as we’ve been saying is essentially illegal.

He also touched on adjustments on other structures such as Hak Pakai and HGB. The bottom line was that doing things legally actually works out cheaper in the long run so Terje advised people to seriously consider changing from the nominee structure into something more legal as it won't get any easier to do this the longer they leave it.

So, the question is ...

Have many expats come clean and tried to make their ownership legal?

Terje explains further that “the confusion is now more towards what you can do or not do on a lease if you’re a foreigner and you’re not registered here. There may not be restrictions for anyone to lease land but what happens from that moment on to live in it or commercialize it is a different story.”

“People aiming at living here are looking more at the Hak Pakai title. Several investment companies are already successfully operating under a PT PMA holding Hak Pakai titles, Hak Guna Bangunan or leases under a company. Some of these companies have even been able to lend against their assets and take their business to the next level.”

Have there been any implications for nominees?

“The talks continue,” says Terje. “Last year’s tax amnesty, which ran into this year, had an interesting side effect on the nominee structure as it suddenly exposed all the nominees to report and pay not only the tax amnesty but also future income taxes on nominee structures operating villas in their names. Many expats have changed their structures as a result of this.”

What's the buzz on the street?

What’s slightly disturbing about this whole ownership debate is the misinformation going around.

We’re aware of the larger real estate agencies and notaries publicly writing about these ownership structures in a very confusing way. Terje suggests “it’s as if they want to still use the nominee structure and massively increase the risks forward for their clients.”

We certainly hope that it’s not a deliberate strategy to confuse and suck money from unsuspecting people.

What's the way forward?

Terje says it “all boils down to doing your homework as who to work with on these aspects, who is reliable and exposing the correct information. Today it’s easy to find government information and larger law firms in Jakarta online. Do it.

"We say choose wisely and don’t choose the one-stop shops where notaries and realtors have a vested interest in supporting each other rather than looking after the customer’s needs.”

Many thanks for your time and insights Terje and I look forward to posting the sixth and final installment of our series on Market Forces in Bali Real Estate.

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