Bali has become one of the world’s most desirable destinations for real estate investment — attracting foreigners seeking lifestyle homes and rental income opportunities. However, renting out a property as a foreigner in Bali involves specific legal, tax, and licensing requirements that must be understood before starting.
This guide explains how foreigners can legally manage daily rental properties in Bali, including ownership structures, management options, and applicable taxes.
1. Can Foreigners Own and Rent Out Property in Bali?
Foreigners cannot directly own freehold (Hak Milik) land in Indonesia. However, there are legal structures that allow foreigners to invest and operate rental businesses safely:
a. Through a PT PMA (Foreign-Owned Company)
This is the most common and secure method for foreign investors. A PT PMA allows full control and legal operation for rental or commercial use. The property can be purchased under the company’s name, and the company can obtain the required licenses for short-term rentals.
b. Through a Leasehold Agreement
Many foreigners lease property from Indonesian owners, typically for 25–30 years, often with the option to extend. Under this structure, the leased property can also be used as a rental business if operated with the proper local permits.
2. Operating Daily Rentals Legally
To rent out a property for short-term stays (daily or weekly), you must obtain a Pondok Wisata license — a local accommodation permit for villas and homestays.
The Pondok Wisata license is generally issued to Indonesian individuals or entities. However, if you operate through a PT PMA, your company can apply for a Commercial Accommodation License (sometimes referred to as Hotel Melati), which functions similarly and allows full legal operation under your business entity.
Alternatively, foreigners can partner with a licensed management company that already holds the necessary operational permits. This is a common and convenient option for investors who prefer a hands-off approach — where the management company handles bookings, guests, maintenance, and regulatory compliance.
3. Taxation for Daily Rentals
Tax obligations depend on whether the property is operated under a company or privately through a lease or partnership.
a. With a PT PMA (Foreign-Owned Company)
- Rental income is treated as business revenue.
• Subject to 11% VAT (Value Added Tax) on rental income.
• The company must also file monthly and annual corporate income tax reports.
b. Without a Company (Private Operation)
- If the property operates legally under a Pondok Wisata license (through an Indonesian nominee or partner), the rental income is subject to a 20% withholding tax.
• Even in this setup, the Pondok Wisata license is mandatory. Operating without it can result in fines, closure orders, or license revocation by local authorities.
4. Choosing the Right Structure: PT PMA vs. Management Company
| Option | Advantages | Considerations |
|---|---|---|
| PT PMA (Own Company) | Full control of operations, branding, and profits; direct legal ownership via the company. | Requires setup cost, accounting, reporting, and tax compliance. |
| Licensed Management Company | No need for your own PT PMA or licenses; all compliance handled for you. | You pay a management fee (typically 15–25% of gross revenue) and have less direct control. |
For most first-time or overseas investors, partnering with a trusted management company is the most practical and compliant approach.
5. Conclusion
Foreign investors can legally operate daily rental properties in Bali by either:
- Establishing a PT PMA with the appropriate tourism and tax licenses, or
- Partnering with a licensed management company that already complies with local regulations.
Whichever route you choose, it’s crucial to:
- Obtain a valid Pondok Wisata or Commercial Accommodation License.
- Understand your tax obligations (11% VAT for companies, 20% withholding tax for individuals).
- Keep all permits and reports compliant to avoid potential penalties.
By setting up the correct structure from the beginning, you can enjoy steady rental income and long-term security while staying compliant with Indonesian law — in one of the most beautiful and profitable real estate markets in the world.
