Buying property in Lombok from Singapore

Why Singapore buyers are looking at Lombok

• Close to home: Lombok runs on Central Indonesian Time, the same as Singapore. With a direct flight of around three hours, a long weekend there is realistic.
• Bali without the crowds: the same surf, warm water and villa lifestyle, with much less traffic and development
• Price: buyers priced out of the popular parts of Bali are looking next door. Land and villas generally cost less in Lombok. Read Lombok vs Bali for the trade-offs.
• Holiday use and rental: many owners use the villa for weekends and holidays, and rent it out the rest of the time

How you'll hold the property

Foreigners, including Singaporeans, can't own freehold land in Indonesia, and buying through an Indonesian friend's name is a trap. Most Singapore buyers take a long lease in their own name, usually 25–30 years with an extension option. It needs no Indonesian residency and can be held while you live in Singapore. Read leasehold in Lombok for what to check in the lease.

The alternatives are Hak Pakai, which needs an Indonesian residence permit, and an Indonesian company (PT PMA), which suits larger rental businesses. Read can foreigners buy property in Lombok? and land titles explained.

Tax in Singapore

Singapore generally doesn't tax individuals on foreign-sourced income received in Singapore. So for most Singapore tax residents, rent from a Lombok villa isn't taxed again at home. There are exceptions, for example income received through a Singapore partnership, or a property held through a company.

• Selling: Singapore has no capital gains tax, so a gain on selling the lease isn't normally taxed in Singapore. Frequent buying and selling can be treated as trading, though.
• Stamp duty: ABSD and buyer's stamp duty are charged on Singapore property, not on a lease in Lombok. If you plan to buy a home in Singapore later, ask how your overseas property is treated.
• Not a Singapore tax resident? If you're in Singapore on an employment pass, your home country may still tax your worldwide income. Check with an adviser there too.
• Records: keep the lease, payment receipts, exchange rates on the day of each payment, and management statements. You'll need them for Indonesia, and for any future sale.

Tax in Indonesia

Indonesia taxes rental income from Indonesian property, even when the owner lives overseas. Because Singapore usually won't tax that rent, the Indonesian tax is often the main tax you pay on it. In practice it's often handled through the rental management company or your ownership structure, and the rate depends on how the property is held and rented. Singapore and Indonesia have a tax treaty, which decides which country can tax what.

Ask the developer or manager, in writing, exactly what tax they withhold or pay on your behalf, and get the tax slips. Then have an Indonesian tax adviser look at your setup before you sign. It's much cheaper to set up correctly than to fix later.

Moving money

• Use a specialist transfer service: on large payments, transfer services and currency brokers usually beat the big banks' exchange rates. Compare before each stage payment.
• Pay only into a company or notary account: never into a personal account. Check the account details by phone before every transfer, because email payment scams target property buyers.
• Watch the currency: Lombok villas are usually priced in US dollars or rupiah, and your income and savings are in Singapore dollars. A weaker Singapore dollar during a staged off-plan payment plan raises your real cost. Some buyers lock in part of the amount with a forward contract.
• Keep records: banks may ask where large sums come from. Keep the paperwork for every payment.

Borrowing

Singapore banks generally won't lend against property in Indonesia, and Indonesian banks rarely lend to foreigners. CPF savings are for property in Singapore, not overseas. Most buyers use cash savings, or borrow against a Singapore property. If you do, remember the loan is in Singapore dollars while the property is not.

Getting there

Scoot flies direct between Singapore and Lombok International Airport, taking about three hours. Schedules and frequencies change, so check current routes when you plan a trip. The alternative is to fly to Bali or Jakarta and connect on a short domestic flight, or take a fast boat from Bali. From the airport, the south coast is about half an hour to an hour by car.

Singapore citizens can visit Indonesia visa-free for up to 30 days. That stay can't be extended, so for longer trips you'd need a visa on arrival or another visa instead. Singapore permanent residents and pass holders follow the rules for their own passport. Read visas for property owners if you plan longer stays.

Viewing from Singapore

Lombok is close enough to see in a weekend, and that's worth doing before you commit. Many buyers start with a video-call tour of the site and the area, run by the developer, then fly over to see it. Don't pay more than a small refundable reservation without seeing the land, or having someone independent inspect it for you.

Estate planning

Make sure the lease says it passes to your heirs. Check that your will, or an Indonesian will, covers the property. Leases held in two names, such as a couple, need clear wording on what happens if one of you dies. Indonesia may have its own rules on inherited property, so take advice there too.

Your checklist

• Read the off-plan checklist and the costs of buying
• Engage your own Indonesian notary (PPAT), independent of the developer
• Talk to an Indonesian tax adviser, and a Singapore adviser if your situation isn't simple
• Set up a transfer service, and check every account by phone
• Stress-test the rental income in Singapore dollars, at low occupancy and after Indonesian tax
• Fly over and see the land before paying more than a reservation

Looking at Lombok from Singapore? Tell me what you're after, and I'll arrange a video-call tour with the developer and send the details.

This guide is general information, not tax or financial advice. Singapore and Indonesian tax rules change and depend on your situation. Talk to a qualified adviser in each country.