Biggest Mistakes Foreigners Make When Buying Villas Under a PMA – And How to Avoid Them in 2025

Introduction: The Allure and the Risk

Bali, Lombok, and Sumbawa remain three of the hottest villa investment destinations in 2025, attracting foreign buyers from around the world. The dream is simple: wake up to ocean views, enjoy steady rental income, and own a piece of paradise that can appreciate in value over time. For many, buying villas under a PMA (Penanaman Modal Asing – a foreign-owned company) seems like the perfect solution. A PT PMA provides legal stability, the ability to hold Hak Guna Bangunan (HGB) titles, and a structured pathway for future resale or share transfers.

But here’s where things get tricky. Too many investors rush into the process of buying villas under a PMA without a clear legal and tax strategy. Some rely on nominee arrangements or overcomplicate their corporate structures, leaving them vulnerable to disputes, unnecessary costs, or compliance issues. Others fail to plan for capital gains tax or inheritance scenarios, which can create major financial burdens years down the line.

This article explores the three most common, and costly, mistakes foreigners make when buying villas under a PMA, and how you can avoid them. By understanding these pitfalls upfront, you’ll protect your investment, secure your ownership rights, and maximize your property’s value when it’s time to resell or pass it on to the next generation.

Understanding PMA Ownership for Villas

Before diving into the common mistakes, it’s important to understand what a PT PMA really is and how it relates to villa ownership in Indonesia. A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a foreign-owned limited liability company. Under Indonesian law, a PT PMA is one of the very few legal structures that allow foreigners to hold land rights in their company’s name, specifically, Hak Guna Bangunan (HGB), which is a “Right to Build” title.

For many investors, buying villas under a PMA seems like the most secure option. HGB titles are valid for up to 30 years and can typically be extended for another 20 years, making them attractive for long-term investment. This structure allows your company to own the villa legally, rent it out, and even sell it in the future by transferring the shares of the PT PMA, a process that can be faster and more tax-efficient than selling the property itself.

However, there are also risks and limitations to be aware of. A common misconception is that buying villas under a PMA gives you “freehold forever.” This isn’t accurate. HGB titles still require periodic extensions, and the land always ultimately belongs to the state. Another issue is that the PT PMA must remain an active, compliant company, paying taxes and submitting reports annually. Failure to do so can jeopardize the company’s status and, by extension, its right to the property.

Understanding these nuances is crucial before buying villas under a PMA. When structured correctly, it’s a powerful tool for foreign investors, but skipping proper legal and tax planning can turn a promising investment into an expensive liability.

Mistake #1: Nominee Risks

One of the most common, and costly, mistakes foreign investors make is mixing buying villas under a PMA with nominee arrangements. Despite having a legal structure that allows foreign ownership through a PT PMA, some investors still register the villa or land under an Indonesian nominee’s name. This is often done to “speed up” the process or reduce perceived costs, but it can create a legal time bomb.

Nominee arrangements mean that while the property is technically in the nominee’s name, the foreigner provides the funds and assumes that a private agreement will protect their rights. Under Indonesian law, however, these agreements may be unenforceable. If the relationship with the nominee deteriorates, due to personal disputes, divorce, or even death, the foreign investor may lose control of the villa entirely. Courts often side with the name on the land certificate, which puts the foreigner at a major disadvantage.

When buying villas under a PMA, investors should fully utilize the company’s legal capacity to hold land under an HGB title. This is the safest alternative and ensures that the villa remains under the PT PMA’s ownership, regardless of personal conflicts. Adding a clear and legally drafted shareholder agreement further protects all stakeholders, outlining rights, responsibilities, and exit strategies for the company.

In short, nominee arrangements may look simpler but carry enormous risks. The proper use of a PT PMA, supported by professional legal counsel, is far more secure for buying villas under a PMA and protecting your investment long-term.

Mistake #2: Overcomplicated Corporate Structures

Another trap investors fall into when buying villas under a PMA is overcomplicating the corporate structure. Many first-time investors assume that setting up multiple PMAs, one for land ownership, another for operations, and sometimes even a third for branding, will protect them from risk or taxes. In reality, this often leads to unnecessary administrative burdens, higher legal costs, and double taxation. Each PT PMA is subject to annual compliance filings, tax reporting, and audit requirements, which can quickly add up in time and expense.

Another common mistake is purchasing a “shelf company”, an existing PT PMA, without conducting proper due diligence. While buying a pre-registered company may seem faster, it can hide liabilities such as unpaid taxes, employee disputes, or improper business classifications (KBLI). These inherited risks can come back to haunt you years later, especially when you try to sell or restructure the business.

When buying villas under a PMA, it is critical to ensure that the company’s KBLI codes align with your intended villa activities, whether for long-term rental, short-term holiday accommodation, or hospitality services. Using the wrong classification can trigger compliance issues or even lead to operational shutdowns by authorities.

The smarter approach is to keep the structure lean and legally sound. Work with experienced legal and tax advisors to set up a single, well-structured PT PMA that can own the villa and handle its rental operations under the correct KBLI. This not only reduces compliance costs but also makes the company more attractive to future buyers or investors when you exit.

In short, simplicity is strength. A properly structured PT PMA is the most effective way to secure your investment and avoid unnecessary headaches when buying villas under a PMA.

Mistake #3: Poor Tax and Inheritance Planning

The third, and perhaps most costly, mistake investors make when buying villas under a PMA is failing to plan for tax obligations and inheritance scenarios. Many foreign buyers focus only on securing the property and overlook the long-term tax exposure that comes with villa ownership and rental income. Under Indonesian law, PT PMAs are subject to corporate income tax (currently 22%) on profits generated from villa rentals. In addition, Value-Added Tax (VAT) of 11% may apply if your PMA crosses the annual revenue threshold, and there could be withholding taxes on payments to foreign shareholders.

Ignoring these obligations can result in back taxes, penalties, and even audits from the Directorate General of Taxes (DJP). The reality is that buying villas under a PMA is not just a property transaction, it is the creation of a business entity with ongoing fiscal responsibilities. Proper tax planning can significantly reduce liabilities, for example by structuring expenses efficiently, applying for VAT registration at the right time, and taking advantage of double tax treaties where applicable.

Inheritance planning is another area that many investors overlook. If a foreign shareholder passes away without proper planning, their shares in the PT PMA could become tied up in probate or disputed among heirs, delaying operations or sale of the villa. Worse, without a clear succession plan, local partners or co-shareholders may face legal and financial uncertainty.

To avoid this, investors should put in place a will that recognizes their Indonesian assets, along with a shareholder agreement that clearly outlines the transfer of shares upon death, disability, or exit. Some investors also use exit planning strategies, such as granting power of attorney to trusted representatives, or setting up holding structures that simplify share transfers.

When buying villas under a PMA, thinking ahead about both taxes and inheritance ensures business continuity and protects your family’s interest. With the right strategy, you can maximize your after-tax returns, minimize disputes, and make future resale or succession smooth and stress-free.

Long-Term Implications: Resale & Exit Strategy

When it comes to buying villas under a PMA, many investors focus only on acquisition, but savvy investors think about the exit from day one. A villa purchase under a PT PMA is not just about ownership; it’s also about creating an asset that can be resold or passed on to new shareholders without legal headaches.

Future buyers will conduct due diligence on your PMA before purchasing its shares. They will review corporate documents, zoning permits, building licenses (IMB/PBG), and tax compliance history. If your PMA has missing documents, unpaid taxes, or irregularities, it can scare away buyers or significantly lower your selling price.

Poorly structured ownership can make resale complicated. For example, if multiple shareholders hold small percentages without a clear shareholder agreement, it may be hard to get unanimous approval for the sale. Similarly, if your PMA’s KBLI classification does not clearly allow villa rental operations, buyers may be hesitant to proceed, fearing legal risk.

This is why buying villas under a PMA should always involve proper documentation, regular tax reporting, and zoning compliance. Clean records not only protect you during operations but also make your business more attractive to investors when it’s time to sell.

A well-structured exit strategy includes keeping your company books updated, ensuring your villa complies with local regulations, and maintaining transparent financial statements. This level of preparation allows you to command a higher price for your shares and ensures a smooth transfer process for the next owner.

Ultimately, thinking ahead when buying villas under a PMA turns your property into a liquid, marketable asset, not just a personal retreat, and positions you for maximum ROI when you decide to exit.

How to Structure Your PMA Properly

The best way to avoid costly mistakes when buying villas under a PMA is to set up your company structure with care from day one. A well-structured PT PMA not only keeps you legally compliant but also ensures smooth operations and an easier resale process in the future.

Step 1: Conduct Thorough Due Diligence

Before purchasing land or a villa, verify the land status (Hak Guna Bangunan or Hak Sewa), zoning regulations, and building permits (IMB/PBG). This ensures that the property you acquire can legally be used for its intended purpose, such as villa rentals. Many investors rush into buying villas under a PMA without checking these details, leading to expensive legal disputes later.

Step 2: Draft Solid Shareholder Agreements

Work with a trusted notary and legal consultant to prepare a clear shareholder agreement. This document should outline rights, responsibilities, voting powers, and exit mechanisms. This is especially important if there are multiple foreign investors involved in buying villas under a PMA, as it prevents conflicts and provides a clear process if someone wants to sell their shares.

Step 3: Keep the Corporate Structure Simple

Avoid unnecessary complexity like multiple layers of companies or using offshore entities unless absolutely required for tax reasons. A simple and transparent PMA is easier to manage and less likely to attract regulatory scrutiny.

Step 4: Stay on Top of Compliance

Maintain updated corporate documents (Deed of Establishment, NIB, OSS licensing) and submit taxes on time. Buyers will review these documents during due diligence, and clean records increase the value of your investment.

By following these best practices when buying villas under a PMA, you build a compliant, marketable asset that is attractive to future buyers and minimizes your risk exposure.

Case Examples: Good vs. Bad Structuring

Real-world examples show just how much the right approach matters when buying villas under a PMA.

Case 1: The Risky Nominee Setup

An investor in Bali set up a PMA but still placed the land certificate under a local nominee’s name to “speed things up.” When the relationship soured, the nominee refused to transfer the property back, forcing the investor into a lengthy legal dispute. To make matters worse, the tax authorities discovered unreported villa rental income, resulting in significant penalties. This case highlights the danger of mixing nominee arrangements with buying villas under a PMA — it defeats the legal protection that a PMA is meant to provide.

Case 2: The Clean and Compliant PMA

Another investor in Lombok followed best practices from the start: conducted proper due diligence, drafted a shareholder agreement, and ensured zoning compliance. Years later, when they decided to exit, the resale process was smooth. The buyer’s legal team quickly verified the company’s clean tax history and updated corporate documents, allowing the sale to close in record time.

Lesson Learned

These examples make it clear that structuring your PMA correctly from day one saves time, stress, and money. Whether your goal is long-term villa operations or a profitable resale, a transparent and compliant structure is key to success when buying villas under a PMA.

Practical Checklist for Foreign Investors

When buying villas under a PMA, a clear, actionable checklist can save you from costly mistakes. Use this as your guide before signing any deal:

✅ Confirm Zoning and Land Status‍

Verify that the land is properly zoned for tourism or residential use. A villa built on non-compliant land can’t be legally rented, putting your investment at risk.

✅ Draft a Solid Shareholder Agreement‍

Work with a notary to clearly outline rights, responsibilities, and exit options between shareholders. This step prevents disputes years later when selling or passing down the business.

✅ Involve a Tax Advisor Early‍

Tax planning is crucial when buying villas under a PMA. A professional can help you understand corporate income tax, VAT obligations, and potential capital gains tax when selling.

✅ Secure a Proper HGB Title‍

Ensure the Hak Guna Bangunan (HGB) title is registered under the PMA’s name — not a nominee’s. This gives your company the legal right to use the land and makes resale easier.

✅ Keep Corporate Compliance Up to Date‍

File annual reports, maintain accurate bookkeeping, and stay current with OSS and BKPM requirements. Buyers will check your compliance before acquiring shares.

By following this checklist, investors can protect their assets, streamline future resale, and maximize ROI when buying villas under a PMA.

Future Outlook: PMA Ownership in 2025 & Beyond

The future of villa investment in Bali, Lombok, and Sumbawa looks promising, but it will demand a higher level of compliance and transparency. The Indonesian government continues to encourage foreign investment through favorable policies, while also stepping up enforcement against illegal nominee arrangements. This means that buying villas under a PMA will remain the safest and most compliant path, as long as it is structured properly.

In 2025 and beyond, we can expect stricter due diligence by notaries, tax offices, and even potential buyers. Companies that fail to maintain accurate corporate records, zoning compliance, and clean tax reporting may find it difficult to sell their assets or transfer shares. Conversely, investors who take the time to set up their PMA correctly will enjoy easier resale, higher valuations, and stronger community support.

For foreign investors, the key takeaway is clear: future-proof your investment by prioritizing proper corporate structuring, tax planning, and shareholder agreements from day one. Buying villas under a PMA is not just a legal formality, it’s a long-term strategy for protecting your capital.

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