Why Invest in Lombok? Tax Benefits and Inheritance of HGB Property
Lombok is emerging as an attractive alternative to Bali for foreign investors. With economic growth, increasing tourism, and still-affordable prices, this Indonesian island offers excellent opportunities—especially in terms of taxation and estate planning.
But what tax advantages are available to foreign investors? And more importantly, what happens when HGB property is inherited? Here's a complete breakdown to help you optimize your investment in Lombok.
1. A Tax-Friendly Environment for Foreign Investors
Indonesia offers several tax benefits for foreign investors, particularly through the creation of a PT PMA (foreign-owned company), which can legally hold real estate under HGB status (Hak Guna Bangunan – Right to Build).
📌 Key Tax Advantages:
✅ No wealth tax: Unlike some European countries, Indonesia does not levy a tax on property ownership.
✅ Low property tax: The PBB (Pajak Bumi dan Bangunan), Indonesia’s property tax, is very low—generally between 0.5% and 1% of land value.
✅ No double taxation with certain countries: Indonesia has signed double taxation treaties with several countries, including France and Belgium, meaning rental income won’t be taxed twice.
✅ Corporate tax on rental income: If you rent out your HGB property through a PT PMA, you're subject to corporate tax of 22%, which is lower than the individual income tax rate.
✅ Tax depreciation available: A property held through a PT PMA is eligible for accounting depreciation, reducing the taxable income and lowering corporate tax.
2. Inheriting HGB Property in Indonesia
One of the key concerns for foreign investors is the inheritance of real estate. In Indonesia, foreigners cannot inherit freehold property (Hak Milik) directly—but they can inherit or pass on HGB property, especially when held through a PT PMA.
📌 How does HGB inheritance work?
✅ If the property is held through a PT PMA:
The investor can pass company shares to their heirs.
In case of death, succession follows the laws of the investor’s home country.
It’s recommended to include heirs as co-shareholders from the beginning to avoid administrative issues.
✅ If the HGB is held in your personal name:
A foreigner can inherit HGB property only if they meet legal criteria (e.g., having a KITAS/KITAP visa or operating a business in Indonesia).
If the heir doesn’t meet the requirements, they must sell the property within 1 year.
📌 HGB renewal and its impact on inheritance
HGB is granted for 30 years, renewable up to 80 years. Upon expiration, it can be extended directly with the government. Unlike a lease (Hak Sewa), HGB is transferable and inheritable, offering greater security for heirs.
📢 Tip: To ensure a smooth transfer, it is highly recommended to structure the investment through a PT PMA and prepare a clear will specifying the share distribution.
3. Lombok: A Fiscal Paradise Compared to Bali?
More and more investors are choosing Lombok over Bali—and not just because of lower prices. Lombok enjoys rapid development and a more favorable tax and regulatory environment:
✔ Fewer local taxes and less administrative pressure than Bali
✔ Fewer restrictions on short-term rentals and tourism operations
✔ High capital appreciation potential thanks to infrastructure projects (Mandalika, international airport, new highways)
4. Conclusion: A Tax-Optimized and Secure Investment for Future Generations
Investing in Lombok via HGB under a PT PMA allows you to benefit from favorable tax treatment and ensures smooth inheritance planning. Unlike leasehold or personal title structures, HGB property—if set up properly—can be easily transferred to heirs.
