How to buy and operate a Bali freehold property as a foreign investor

If you are a foreign buyer looking at a property listed as freehold in Bali, there is one thing to understand from the start: you cannot hold that title in your own name. 

Hak Milik, the SHM title that makes a property "freehold," is restricted under Indonesian law to Indonesian citizens. 

What you can do is purchase it through a PT PMA, a foreign-owned Indonesian company, which holds the property under a different title called HGB. 

This article explains how that works, how to set up the PT PMA, and what running the rental operation looks like afterward.

SHM vs HGB: what changes when a PT PMA buys

When a property sitting on SHM land is purchased by a PT PMA, the title must be converted from Hak Milik to Hak Guna Bangunan (HGB) before or during the transaction. 

These are two distinct legal titles:

• SHM (Sertifikat Hak Milik) is the strongest land title in Indonesia. It grants full ownership with no expiry. It can only be held by Indonesian citizens.
• HGB (Hak Guna Bangunan) is a right-to-build title. It grants the company the right to construct and own buildings on the land for a defined period, typically 80 years.

The conversion from SHM to HGB is a standard part of the transaction when a PT PMA acquires what is commonly called a freehold property. 

The process is handled through a notary and the National Land Agency (BPN). 

Once converted, the title is held by the PT PMA, not by you personally. For more context on how these titles differ in a Bali investment context, see our article on freehold vs leasehold in Bali.

What a PT PMA requires

Shareholders and capital

• Minimum two shareholders, individuals or corporate entities of any nationality
• Shareholders do not need to be Indonesian residents
• Minimum paid-up capital of IDR 2.5 billion (approximately USD 150,000) as of 2026, reduced from IDR 10 billion under BKPM Regulation No. 5 of 2025
• Capital does not need to be deposited immediately. A capital statement letter is accepted during registration and the actual deposit happens after the company is established during an undefined timeframe.
• Separately from the paid-up capital, the company must declare a total investment plan of IDR 10 billion per KBLI business activity code. This is a declared investment commitment tied to your business classification, not an additional cash deposit requirement on top of the paid-up capital

These are two different obligations and it is important not to confuse them. The paid-up capital is what you inject into the company. 

The total investment plan is a declared figure that must align with your actual operations and is reported through LKPM quarterly filings.

To make this concrete: a foreign investor purchasing a villa for USD 1,000,000 would declare that property acquisition as part of their total investment plan. At current exchange rates that figure sits well above the IDR 10 billion investment plan threshold, so that obligation is satisfied by the investment itself. 

The paid-up capital of IDR 2.5 billion remains a separate requirement that must be reflected in the company's registered capital structure. In practice, the property value, setup costs, and initial operating capital all contribute to what gets declared as the total investment, and a local notary or compliance provider will help structure this correctly during registration.

Board

• Minimum one director and one commissioner
• Both can be foreign nationals
• The director must hold or be applying for an Investor KITAS if managing operations from within Indonesia
• The commissioner oversees the director and is not involved in daily operations

Registered address

• Must be a commercial or office address, not residential
• Virtual office addresses are accepted in most sectors including Bali
• This is separate from the physical property you are purchasing

KBLI code

• Every PT PMA must declare its business activity through a KBLI code, Indonesia's business classification system
• For short-term villa rentals, the KBLI code determines whether 100% foreign ownership is permitted and which licenses are required
• Selecting the wrong code is a common source of registration delays and should be confirmed before any documentation is submitted

How the registration process works

The sequence runs as follows:

• Business classification review to confirm the correct KBLI code
• Notary prepares the Deed of Incorporation
• Legal entity approval from the Ministry of Law and Human Rights
• Tax registration (NPWP)
• NIB issuance through the OSS-RBA system (Online Single Submission)
• Sector-specific business licenses issued based on activity risk level

The full process typically takes three to six weeks. The OSS system handles the NIB and license tracking digitally, but a notary is required for the deed stage and cannot be bypassed.

Documents required from shareholders and directors:

• Passports or national ID cards
• Powers of Attorney signed by each shareholder towards the notary
• Legalized documents depending on country of origin if needed

Documents required for the company:

• A proposed company name of at least three words, approved by the Ministry of Law and Human Rights
• Business address documentation
• Notarized Articles of Association
• Company letterhead and stamp design

If you want to be introduced to parties who can facilitate and manage the whole setup process, we can help connect you with the right people.

Running the company after registration

Once the PT PMA is registered and the property is operating as a rental, the company carries ongoing compliance obligations:

• Quarterly LKPM reports filed with BKPM covering investment activity
• Monthly and annual tax returns submitted to the tax authority
• Accounting records maintained in line with Indonesian financial reporting standards
• Sector-specific licenses renewed before expiry
• Any changes to directors, shareholders, address, or business activities reported through OSS

For most foreign investors this is the part that looks most daunting on paper. 

In practice, it does not need to add any complexity to how you run the property. The compliance layer, including tax filings, LKPM reporting, bookkeeping, and license renewals, can be fully delegated to a local accounting firm. 

Many Bali-based operators handle it this way, paying a fixed monthly fee to a local provider and receiving no more involvement than reviewing an occasional summary. You retain control of the company while someone else manages the administrative obligations on your behalf.

What this means in practice is that owning and operating through a PT PMA does not require you to become fluent in Indonesian tax law or to hire an in-house finance team. The structure is designed for foreign investors, and the local service ecosystem around it reflects that.

Stay permits under a PT PMA

If you plan to spend time in Bali managing the property, the PT PMA gives you a pathway to a legal stay permit:

• Investor KITAS: available to foreign shareholders in a supervisory or strategic role, not receiving a salary as an employee. Does not require a separate work permit.
• Working KITAS: required if you are managing daily operations or receiving income from the company. Requires RPTKA approval (Foreign Worker Utilization Plan) and a work permit notification.

The distinction matters because immigration data is increasingly cross-referenced with OSS and tax records in Indonesia. Misclassifying your role creates compliance exposure.

Final thoughts

Setting up a PT PMA can look complex from the outside.

The reality is that the process is more streamlined and flexible than it appears, and not everything covered in this article will necessarily apply to your specific situation. The requirements vary depending on your KBLI classification, shareholding structure, and how you plan to operate the property. A good local notary or compliance provider will quickly narrow down what actually applies to you.

Once the company is registered, the ongoing compliance obligations can be fully delegated. You do not need to be involved in the day to day administrative side of running a legal entity in Indonesia. Most investors are not.