INFO

Here you will find more detailed info regarding buying property in Bali.

Buying Property in Bali (for foreigeners)

Are you dreaming of buying a private villa and living the tropical dream in Bali?

Be careful, because we’ve all heard about some rip-off stories, or perhaps you’ve even heard about the local laws and in specific the (im)possibilities Bali property ownership by foreigners.

It is a complicated matter, but really, it’s not all that hard, as long as you know what you’re doing, you are well-informed, and you know what not to do.

Buying a villa in Bali can also be a great investment, creating passive income and before you realize it, you’ve earned your investment back!

Some important basic information:

Here’s are some basics you need to know before you get started on turning dreams into reality – how to buy a villa in Bali without getting ripped off:

Well, let’s start with what you should NEVER do: The controversial nominee agreement is what can get you ripped off big time.

The Nominee Agreement (Don’t do this)

The Nominee Agreement is solely based on trust and all too often, this has gone wrong, and people have lost their money.

With the Nominee Agreement, you got nothing – your nominee (Indonesian national) owns the property and all too often this has turned out ugly for the investor.

How come?

OK – we won’t bind around the bush:

Foreigners are not allowed to own land in Indonesia. Period.

Even if you are married to an Indonesian, you need to sign a prenuptial agreement which states the foreigner has no right to claim ownership of land in Indonesia.

It is clear and simple – you will never own the land!

The nominee agreement seems like a nice and simple way to go around the rules, but honestly, it is not worth the risk! Yes, the legal way takes longer, and in the end, you don’t even own the villa.

With the nominee agreement, you got nothing – your nominee (Indonesian national) owns the villa, and all too often this has turned out ugly for the investor.

So, what do you have to do?

What are your options?

• Buy the property (land and house) if you are an Indonesian citizen.

• Enter a Leasehold Agreement if you are a foreigner. It's legal, safe and solid.

Buy option for Foreigners?

Foreign individuals can only own land in Bali through specific legal structures, such as:

• Leasehold or 

• Right-to-use titles.

Freehold ownership is limited to Indonesian nationals.

What is a Leasehold vs. Freehold?

Understanding the types of property ownership available—namely Leasehold and Freehold—is crucial for making informed decisions.

This article aims to clarify these concepts, providing a balanced view to assist both local and foreign investors.

Freehold

Freehold ownership is strictly limited to Indonesian citizens.

Freehold ownership in Indonesia, known as 'Hak Milik", is the most complete form of property ownership This title grants the owner full rights over the land and any structures built on it, with no expiration period.

Foreign investors are prohibited from holding freehold property unless they establish an Indonesian-based company (PT PMA), which allows them to acquire land under the Hak Guna Bangunan (HGB) title, a form of long-term land-use right. This form is used for commercial purposes, such as a hotel, or company.

Leasehold

Leasehold property, or 'Hak Sewa', allows an individual or entity to use and occupy land or buildings for a specified period, typically ranging from 25 to 30 years, with possibilities for extension. This form of ownership is particularly common among foreign investors, as it provides a legal pathway to utilize property in Bali without breaching regulations prohibiting foreign freehold ownership. 

To buy property in Indonesia, foreigners will also need to obtain Nomor Pokok Wajib Pajak (NPWP) and open a local bank account.

At Kampoeng Belanda foreigners can have a Leasehold agreement, with a duration of 25 years, and the possibility to extend.

Kampoeng Belanda is located in a ‘Pink Zone’, meaning dedicated for tourism purposes.

This gives you the possibility to rent out your house, if you are not occupying it yourself.

When you purchase or lease a home in Kampoeng Belanda, you are actually purchasing much more, because your home and plot of land are part of a complex, and you have access to all of the complex's common area's, including the aula, swimming pool, garden, bales, , etc.

Freehold Pro's and Cons

Advantages of Freehold Ownership (for Indonesian Citizens)

Permanent Ownership: The property remains under the owner’s name indefinitely.

Full Control: Owners have complete authority to develop, modify, or use the property as they see fit within local regulations.

Inheritance Rights: Freehold properties can be passed down to heirs, ensuring long-term asset retention.

Disadvantages of Freehold Ownership 

Restricted to Indonesian Citizens: Foreign investors cannot legally own freehold property.

Higher Acquisition Costs: Freehold properties generally require a larger initial investment compared to Leasehold options.

Maintenance Responsibility: The owner is fully responsible for property upkeep, repairs, and taxes.

Tax Obligations for Freehold Properties

Land and Building Acquisition Duty (BPHTB): 5% of the transaction value, paid by the buyer.

Income Tax on Property Sales (PPh): 2.5% of the sale price, paid by the seller.

Annual Land and Building Tax (PBB): Up to 0.5% of the taxable value, paid annually by the owner.

Luxury Goods Sales Tax (PPnBM): Up to 20%, applicable to high-value properties classified as luxury real estate.

Value Added Tax (VAT/PPN): Effectively 11% for most goods and services; 12% for luxury goods, applicable to sales of new properties by developers.

*Tax regulations may vary by region and are subject to change. Always seek advice from a qualified tax consultant or local tax authorities to ensure compliance with the latest policies.

Leasehold Pro's and Cons

Advantages of Leasehold Ownership

Accessible to Foreign Investors: Leasehold ownership provides a compliant investment route for non-Indonesian buyers.

Lower Initial Investment: Leasehold properties often require a lower upfront cost compared to Freehold properties.

Flexible Investment Term: Lease agreements can be structured to align with investment timelines and objectives.

Disadvantages of Leasehold Ownership

Limited Duration: Ownership rights are temporary, reverting to the original landowner upon lease expiration unless extended.

Depreciating Asset: The property’s market value decreases as the lease term nears expiration.

Renewal Renegotiation: Lease extensions require renegotiation and may involve additional costs or legal processes.

Leasehold Extension Fee (for Leasehold): This is a future expense, when the lease term ends (often 25–30 years) you will need to pay for the extension, based on the land value at that time.

Tax Obligations for Leasehold Properties

Income Tax on Lease Income (PPh): 10% of lease income (or 20% if the lessor does not have a Tax Identification Number).

Value Added Tax (VAT/PPN): Effectively 11% of the lease value, applicable when leasing from a commercial entity.

Annual Land and Building Tax (PBB): up to 0.5% of the taxable value, typically paid by the property owner unless otherwise agreed.

As of January 1, 2025, Indonesia’s VAT rate increased to 12%. However, for non-luxury goods and services, including property leases from commercial entities, the effective VAT rate remains 11%. This is due to an adjusted taxable base calculated at 11/12 of the selling price or transaction value, effectively maintaining VAT on leases at 11%. (Source: pajak.go.id)
  

In short (for foreigners)

The best and safest way is to get a Leasehold long-term lease on your Bali Villa.

The initial period is often between 25 to 30 years and there will be an option in the lease to extend, meaning you can live your entire life here on the island of Bali in that villa of yours.

But we’re not done yet. You also need to determine whether you want to have a villa to live in, or if you’re planning to rent it out and create a possible lucrative business (villa rental).

Why do you need to think about it now? Well, depending on your plans, you need to obtain different titles from the Indonesian government.

•  A villa with a ‘Hak Pakai’ title (right to use) doesn’t allow you to rent out your villa to anyone. 

• Planning to sublease your property in Bali? You need a villa with the title ‘Hak Sewa’ title and you also need to get a ‘Pondok Wisata’ – an operational license for your villa rental.

There is a catch there – the Pondok Wisata can only be given to an Indonesian citizen, unless you start a business in Bali (PMA) which leads to a list of other requirements and rules.

• You can also buy a villa that has a Pondok Wisata already (Kampoeng Belanda).

• Another important note: not all areas in Bali allow you to rent out your property. There are residential zones and areas for tourism. You won’t get a Pondok Wisata license in a residential zone.

You don’t have to worry about all of this, as Kampoeng Belanda is situated in a Pink Zone, and Kampoeng Belanda has a Pondok Wisata License.

Let us handle the Villa Management for you.

You are here, to enjoy your pension time, let all the worries to us.