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Running a rental property legally in Bali as a foreigner requires specific residence permits, business licenses, and company structures that most property investors don't fully understand. The regulations are strict, and the penalties for non-compliance can include deportation and permanent blacklisting from Indonesia.
To operate legally, you need more than just a residence permit - you must establish a PT PMA company, obtain proper business licenses, and comply with ongoing tax and reporting obligations that can cost thousands of dollars annually.
If you want to go deeper, you can check our pack of documents related to the real estate market in Indonesia, based on reliable facts and data, not opinions or rumors.
Foreigners cannot legally operate rental properties in Bali using standard residence permits alone - they must establish a PT PMA company and obtain specific business licenses.
The total setup and annual maintenance costs typically range from USD 4,000-7,000, with ongoing tax obligations of 10% on gross rental income plus corporate taxes.
| Requirement | Details | Cost (USD) |
|---|---|---|
| Residence Permit | Working KITAS with IMTA or Investment KITAS | $500-2,000/year |
| Company Setup | PT PMA with minimum IDR 10 billion capital | $3,000-5,000 |
| Business License | Pondok Wisata or Hotel License via OSS | $1,000-2,000/year |
| Tax Obligations | 10% withholding + corporate taxes | 10%+ of income |
| Timeline | Company registration + license approval | 2-3 months |
| Property Restrictions | Under 5 rooms for Pondok Wisata license | Varies by property |
| Penalties | Fines, closure, deportation, blacklisting | Severe consequences |
Fact-checked and reviewed by our local expert
Daniel Rouquette 🇫🇷
CEO & Co-Founder at Villa Finder
What type of residence permit do you currently need in Bali and how long is it valid?
The most common residence permits for operating rental properties in Bali are the KITAS (Temporary Stay Permit) and KITAP (Permanent Stay Permit).
KITAS permits are valid for 6 months to 2 years depending on the type - Working KITAS, Investment KITAS, Retirement KITAS, or Family KITAS. The Working KITAS requires renewal every year and costs approximately USD 500-1,000 annually including agent fees.
KITAP permits are valid for 5 years and cost significantly more at USD 1,500-2,500 for the initial application. As of September 2025, Indonesia also offers a "Second Home Visa" valid for up to 10 years, but this requires substantial financial commitments including property ownership or bank deposits exceeding USD 130,000.
For rental operations, the most practical option is the Investment KITAS, which allows you to be a company director but requires establishing a PT PMA company first.
Does your residence permit legally allow you to earn rental income in Indonesia?
Most residence permits do not automatically grant you the right to earn income from rental operations in Indonesia.
Only a Working KITAS paired with a work permit (IMTA) legally allows you to earn employment income. However, rental income is considered business income, not employment income, so even a Working KITAS doesn't directly authorize rental operations.
Investment KITAS, Retirement KITAS, and Family KITAS specifically prohibit direct income-generating activities. To legally earn rental income, you must operate through a properly registered Indonesian company structure, not as an individual.
The key distinction is that your residence permit allows you to stay in Indonesia and potentially serve as a company director, but the rental business must be conducted through a legal entity like a PT PMA company.
What exact business license do you need to run rentals legally in Bali?
You need a "Pondok Wisata" license for small-scale rental operations or a hotel license for larger properties.
Pondok Wisata licenses are designed for villas, guesthouses, and homestays with fewer than 5 rooms. This license allows short-term rental operations and is obtained through Indonesia's Online Single Submission (OSS) system.
Properties with 5 or more rooms require a commercial hotel license, which has more stringent requirements including dedicated reception areas, professional staff, and higher safety standards. The hotel license process is more complex and expensive.
All licenses must be obtained by your PT PMA company, not by you personally. The company applies for the license, and the license is issued to the company entity.
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How much does it cost to obtain and maintain rental licenses annually?
| License Type | Initial Cost (USD) | Annual Renewal (USD) |
|---|---|---|
| Pondok Wisata (Under 5 rooms) | $800-1,200 | $300-500 |
| Hotel License (5+ rooms) | $2,000-4,000 | $1,000-2,000 |
| OSS Registration | $200-400 | $100-200 |
| Tax Registration (NPWP) | $100-200 | Free |
| Tourism Authority Registration | $300-500 | $150-300 |
| Fire Safety Certificate | $200-400 | $100-200 |
| Environmental Compliance | $300-600 | $200-400 |
These costs don't include your PT PMA company setup (USD 3,000-5,000) or legal consultation fees (USD 1,000-2,000).
Total first-year costs typically range from USD 4,000-7,000, with annual maintenance costs of USD 1,500-3,000 depending on your property size and license type.
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Are there restrictions on property types you can rent out under Indonesian law?
Indonesian law imposes specific restrictions on property types and rental operations based on your license type.
Pondok Wisata licenses are limited to properties with fewer than 5 rooms, including private villas, traditional homestays, and small guesthouses. These properties cannot operate as full-service hotels with reception desks or restaurant services.
Properties with 5 or more rooms must obtain hotel licenses and comply with commercial hospitality standards including 24-hour reception, housekeeping services, and restaurant facilities. Hotel licenses also require compliance with building codes for commercial properties.
Foreigners can only operate rentals on leasehold properties or through company-owned properties, as direct land ownership is prohibited. The lease term affects your rental license eligibility - most licenses require lease terms of at least 10 years.
Apartment rentals in mixed-use buildings face additional restrictions, as many residential apartment complexes prohibit short-term rentals in their building regulations.
Do zoning rules in Bali allow short-term rentals in your property area?
Zoning regulations in Bali vary significantly by regency and can prohibit rental operations in certain areas.
Denpasar (including Seminyak and Kerobokan) has the strictest zoning rules, with many residential areas prohibiting commercial rental activities. Green zones (residential) typically don't allow short-term rentals, while yellow zones (mixed-use) may permit them with proper licenses.
Badung Regency, covering Canggu, Uluwatu, and Jimbaran, has more flexible zoning for tourism activities, but still requires compliance with local building height restrictions and density limits.
Gianyar Regency (Ubud area) has specific cultural preservation zones where rental operations may be restricted or require additional cultural impact assessments.
Before obtaining any licenses, you must verify with your local government office (Kelurahan or Desa) that your specific location permits short-term rental operations. Zoning violations can result in forced closure regardless of your business license status.
What are the penalties for operating rentals without proper licenses?
Operating rental properties without proper licenses in Bali carries severe penalties that can permanently damage your ability to do business in Indonesia.
Immediate penalties include property closure orders, fines ranging from IDR 50 million to IDR 500 million (USD 3,300-33,000), and confiscation of rental income. Local authorities conduct regular raids, especially during peak tourist seasons.
Immigration consequences are more severe - operating an unlicensed business can result in deportation, visa cancellation, and blacklisting from Indonesia for 1-5 years. Blacklisted individuals cannot return to Indonesia even as tourists.
Tax authorities can impose additional penalties for unreported income, including back taxes, interest charges, and criminal prosecution for tax evasion. These penalties apply even if you're eventually granted proper licenses.
Insurance companies may refuse claims for properties operating without proper licenses, leaving you personally liable for guest injuries or property damage.
How much tax must you pay on rental income as a foreigner?
Foreigners operating rental properties in Bali face multiple layers of taxation on their rental income.
The primary tax is a 10% withholding tax on gross rental receipts, applied to all income before expenses. This tax is collected monthly and cannot be offset by property maintenance costs or depreciation.
If operating through a PT PMA company, you'll also pay corporate income tax on net profits at rates of 22% for companies with annual turnover exceeding IDR 50 billion (USD 3.3 million), or 25% for smaller companies with specific calculation methods.
Additional taxes include VAT (PPN) at 11% on rental income if your annual turnover exceeds IDR 4.8 billion (USD 320,000), and luxury tax on high-end properties exceeding certain value thresholds.
Total effective tax rates typically range from 15-25% of gross rental income, depending on your property value, company structure, and annual revenue levels. Professional tax consultation is essential to optimize your tax obligations legally.
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Do you need an Indonesian partner or PT PMA company to run rentals legally?
You must establish a PT PMA (Foreign-Owned Company) to operate rental properties legally in Bali as a foreigner.
A PT PMA requires a minimum share capital of IDR 10 billion (approximately USD 630,000) and allows 100% foreign ownership for rental businesses. The company must have at least two shareholders and can be structured with you as the majority owner.
Alternatively, you can establish a local PT (limited liability company) with Indonesian shareholders holding at least 51% ownership. This option requires less capital but gives you minority control over your business operations.
The PT PMA option provides full control over your rental business and profits, while the local PT option offers lower setup costs but requires trusted Indonesian partners who will legally own the majority of your business.
Both company types must be registered in Indonesia, maintain local accounting records, file annual tax returns, and comply with Indonesian corporate governance requirements. The company, not you personally, holds all business licenses and rental contracts.
How long does registration and license approval typically take in Bali?
The complete process from company formation to rental license approval typically takes 2-3 months if all documents are properly prepared.
PT PMA company registration takes 6-8 weeks, including Ministry of Law and Human Rights approval, tax registration (NPWP), and business identification number (NIB) issuance. This process can extend to 3-4 months if documents require corrections or additional approvals.
Business license applications through the OSS system typically take 2-4 weeks after company registration is complete. Pondok Wisata licenses are processed faster than hotel licenses due to simpler requirements.
Additional permits like fire safety certificates, environmental compliance, and tourism authority registration can add another 2-4 weeks to the total timeline. These permits often require property inspections that must be scheduled in advance.
Working with experienced local consultants can reduce processing time significantly, as they understand specific document requirements and can navigate bureaucratic procedures more efficiently.
Can you manage your rental personally or must you hire Indonesian staff?
You can serve as a director of your PT PMA company, but certain operational roles may require Indonesian staff members.
As a company director with proper residence permits, you can handle strategic decisions, marketing, pricing, and guest communications. However, day-to-day operations like check-ins, housekeeping coordination, and local vendor management are often more effectively handled by Indonesian staff.
Indonesian labor law requires that certain positions, particularly front-line service roles, be filled by Indonesian citizens. For Pondok Wisata operations, you typically need at least one Indonesian employee for legal compliance and practical operations.
Larger operations with hotel licenses have more stringent staffing requirements, including Indonesian managers for reception, housekeeping, and food service operations. These requirements are designed to ensure local employment opportunities in the tourism sector.
Many successful rental operators hire Indonesian property managers who handle day-to-day operations while the foreign owner focuses on business development and strategic decisions.
What inspections and reporting obligations must you comply with?
1. **Monthly Tax Reporting** - Submit VAT and withholding tax reports by the 20th of each month, with payments due simultaneously.2. **Annual Corporate Tax Returns** - File comprehensive company tax returns by March 31st each year, including financial statements and supporting documentation.3. **Tourism Authority Inspections** - Quarterly inspections covering guest registration compliance, facility standards, and license validity verification.4. **Fire Safety Inspections** - Annual fire safety certificate renewals requiring property inspections and compliance with safety equipment standards.5. **Environmental Compliance Reports** - Semi-annual reports on waste management, water usage, and environmental impact mitigation for properties in sensitive areas.6. **Labor Ministry Inspections** - Annual inspections of employment contracts, salary payments, and social security compliance for Indonesian employees.7. **Immigration Reporting** - Monthly guest registration reports submitted to local police and immigration authorities, including foreign guest documentation.Non-compliance with any reporting requirement can result in license suspension, fines, or business closure. Most successful operators hire local accounting firms to manage compliance obligations and ensure timely submissions.
It's something we develop in our Indonesia property pack.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Running a legal rental property in Bali requires substantial upfront investment, ongoing compliance costs, and strict adherence to Indonesian regulations.
While the rental market in Bali can be profitable, the legal requirements make it essential to budget for professional setup and maintenance costs that often exceed USD 5,000 annually before considering rental income potential.
Sources
- Bali Solve - Indonesia's Employment Laws for Expats
- Indoned - Business Licenses in Indonesia Guide
- Indoned - Setting Up Rental Business in Bali
- Flado - Indonesian Visas Types 2025
- Golden Harbors - Indonesia Residence Permit
- Immigrant Invest - Indonesia Second Home Visa
- The Nomad Tax - Living in Bali
- Bali Management Villas - Starting Vacation Rental Business