So you have found your dream home and negotiated with the purchase terms with the seller. It is now time to make sure that your property right is recorded and has been effected correctly, it is important to ensure that you follow the correct process. All land transfers and land title deeds are drafted by a Land Deed Official known as a Pejabat Pembuat Akte Tanah (PPAT), and these can be found in even the smallest towns in Indonesia, although finding a competent one can be a challenge sometimes.
The vast majority of land in Indonesia is in fact not registered and is held under traditional title (Hak Adat) which can make determing ownership challenging. Having said that, most land in areas that are of interest to foreigners and PMA companies will already have some form of clear land title. The process to register a property is as follows:
1. Examine Land Certificate at the Land Office
A Land Deed Official will carry out a land certificate examination, this is a relatively quick process, taking about a day, provided that the land book is available at the specific Land Office. This examination should also involve checking with the local planning office to determine what the approved use of the land is for (ie. residential or industry).
You will not receive a written statement following the examination, but a note should be made on the Land Certificate stating that it has been examined in accordance with Government Regulations. The cost for this should be approximately Rp50,000.
2. Seller Pays Transfer Tax
Prior to executing the transfer deed, the seller must pay a Transfer Tax that is equivalent to a proportion of the property price (usually 5%). This is paid to a bank that has been appointed by the Ministry of Finance to accept tax payments.
3. Buyer Pays Tax on Acquisitions
The purchaser is require to pay tax on Acquisition of Land and Building (BPHTB) which is 5% on the sales price, less the non-taxable sale value (Nilai Perolehan Obyek Pajak Tidak Kena Pajak or NPOPTKP). The non-taxable sale value is determined regionally, so you will need to check locally to determine what it is.
The tax is paid at a bank that has been appointed by the State Treasury to accept tax payments, or can be paid at a post office where the land is located.
4. Execution of Sale and Purchase Land Deed by PPAT
After the relevant taxes have been paid the sale and purchase of the Land Deed can be executed before the Land Official (PPAT). The documents that are required to complete the execution include the following:
– Original land certificate;
– Evidence of latest payment of tax on land and building (as is required to be paid each year) by the owner;
– Evidence of payment of Tax on Transfer of Land and Building;
– Evidence of payment of payment of Tax on Acquisition of Land and Building;
– If a company is involved, Evidence of deed of Company Establishment and Company Tax Registration Numbers, corporate approvals of seller to dispose of the land and purchaser to acquire land;
– Deed of Establishment amended with both seller and purchaser;
– Advise Planning from the City Administration Institution;
– Permit for Building Establishment.
5. Registration of Land Deed
The local Land Office will now need to register the Land Deed with the purchaser’s name and record it on the land certificate. The deed must be submitted to the Land Office within seven days of the signing of the sale and purchase of the Land Deed, this can however take a lot longer in practise. The Land Office will cross out the name of the seller, add the name of the purchaser, stamp and sign the Land Deed. Stamp duty of Rp6,000 will be payable per document at this time (at least two documents will be required), along with some administrative fees.
6. Register the Land Deed at the Tax on Land and Building Office
To ensure the Land Deed registration is complete, ownership must also be changed with the Tax Office. The taxpayer will need to report the change in ownership to the local Tax Office.
In total the registration process can take about 6 weeks to complete. It is important to ensure that you hire the services of an Indonesian lawyer to assist with the process, and ensure you have completed everything necessary.
Another thing to note, whilst it may be natural to give a deposit to a seller this is not advisable. There is no code of conduct for real estate firms in Indonesia, and they have no legal obligation to protect the buyer’s interest or guarantee title.