Private Villa in Bali: Legal and Tax
The real estate market in Indonesia has opened to foreign investors only recently. Therefore, some aspects of purchasing a private villa in Bali are rigid and some are simpler and easier than the western world.
The Indonesian law prohibits foreigners from owning land on the archipelago (only Indonesian citizens have the right to own a property title).
Therefore, to purchase a private villa in Bali you have two options:
Option 1: Sign a Leasehold agreement. This is the easy and most common option. With Leasehold agreement you lease the property (land + private villa) for an initial period of 20-30 years with additional option to extend the lease.
Option 2: Find a Freehold asset. This is the more expensive, complicated and not recommended option. As foreign individuals are not allowed to own property (such as a private villa) you can’t register the property under your individual name. You can create a local company (it's a long and costly process with ongoing tax implications) that owns the property. Alternatively, you can try to identify a local Indonesian that will sign on the contract and “own” the private villa in Bali but that is usually a recipe for disaster as they can “claim” the property for themselves at anytime as it is under their name. We DO NOT recommend to purchase Freehold property as you can achieve the same goals via Leasehold agreement in a cheaper and easier way.
Do I Need A Visa To Own A Private Villa In Bali?
The good news is that you don’t need a visa to own a private villa in Bali. If it’s an investment property you can just let it be managed by a local staff and collect the rental without stepping on the island.
If you do want to visit or live in the island you have several options. We can assist you select and then obtain the right visa the fit your specific situation:
Free 30-day Tourist Visa. If you come just to check out the villa or use it once in a while for less than a month, this is the visa for you!. You can obtain it free upon arrival at the airport in Indonesia. If you overstay, you’ll need to pay ~$70USD per day.
Visa on Arrival (VOA). If you plan to stay up to 60 days you can purchase at the airport a 30 day VOA extendable to 60 days for $38USD. Prior to your 30 day stay you will need to visit an immigration office to extend for the additional 30 days.
Social Visa. If you plan to live in Bali up to 6 months you can use this visa. It must be obtained before entering Indonesia and will allow you to enter the country for 60 days and then extend your stay 4 times for 30 days to a total of 6 months. This visa is a single entry and will automatically end if you leave Indonesia before 180 days.
Business Visa. This 1-year visa allows you to have multiple entries to Indonesia and stay up to 60 days each time. While you cannot earn a salary locally or be employed or contracted by any local company this will allow you to work online and earn an income. This visa is recommended for investors wishing to live in the villa and also rent it or do import/export.
Multiple Entry Visa. This visa is recommended if you want to come to Bali often and stay in your villa each time up to 60 days. The process, costs and validity is similar to the Business Visa, you are just not allowed to do any business related work in Indonesia. It's purely for visit and tourist purpose.
Retirement Visa. This visa is ideal if you are 55+ years of age; have a pension of minimum $1,500 USD/month, or at least $18,270 in savings to provide living expenses while in Bali and proof of health and life insurance. With this visa you’ll be able to stay in Bali for one year and renew for five more.
KITAS. This harder to get visa allows you to work in Indonesia. To obtain KITAS you need a sponsorship from a company. Your company of employment will have to apply for your KITAS. The work permit is called IMTA (which you can get after you have your KITAS). The KITAS can be valid for either 6 to 12 months and can be renewed. The company must be a legal business entity that is allowed to hire a foreigner.
As a buyer of a private villa in Bali you don’t need to pay sale tax, as the seller will pay them. You are only required to pay the Notary (lawyer) fee which equals to 1% of the value of the private Villa you purchased.
Once the Lease under your name you'll need to pay a minimal property tax equal to 0.01% a year.
In addition, you'll need to pay 10% tax on your Net Profit from your private villa if it is rented as a business. This tax is usually deducted from your tax obligation in your home country.
Frequently Asked Questions
Does owning a private Villa in Bali oblige me to have a certain visa?
No, you don’t need to get any particular visa if you purchase a private Villa in Bali and live abroad.
If you do decide to enter Bali (for a visit or a longer stay) then you must obtain a visa from the options we listed above depending on how long you want to stay in Bali and for what purpose (visit, business etc.). We can advise you on the proper visa that fits your needs.
What is the process to buy a private villa in Bali ?
The purchase process for a private vailla in Bali is relatively simple once you decide you want to purchase the villa.
- A deposit of 20% of the purchase price is wired to Notary’s escrow account (a neutral lawyer)
- A Leasehold Agreement is drafted by the Notary and send for your review and approval
- Once approved and signed by you (buyer) the villa owner (seller) signs the agreement.
- The balance of the purchase price wired to Notary’s escrow account.
- Notary release escrow full purchase price to the seller
- Notary declares ownership is fully transferred to the Buyer and the Leasehold Deed is provided to the Buyer
- Notary will notify the Villa’s management company of the Change of Ownership and introduce the Buyer to the management company.
- All future rental income would be received by the Buyer.
Do I must come to Bali to purchase the Villa?
72% of our clients are foreign investors who have purchased a property without visiting the Villa, just based on the property analysis, villa details, video tours and pictures of the Villa. They realized that Bali is an attractive investment opportunity and are happy with the return they receive on their investment.
We specialize in properties that are self-managed and have a professional staff and management company that mange the property for you. Our properties are designed for foreign investors that want to collect the passive income, therefore, don’t feel that you must visit before making the purchase decision – we are providing all the insight and analysis needed to make an educated decision.
That said, we will happily welcome you and show you around if you do decide to fly over and visit Bali. Some clients want to “feel” the place before making an investment decision and we respect that.
Do you provide a guarantee for the Villa?
Yes! We stand behind our villas. We guarantee that the Villa will be transferred to you in excellent living condition and we provide 6 months guarantee against any major construction defect that might not have been identified in the inspection prior to the transfer of ownership. This guarantee does not cover cases of force majeure, bad weather, earthquake, floods and fortuitous event. For your home insurance, we can direct you to our partner, Zurich Insurance, that insures the majority of our customers, against theft, fire, earthquake, flood, degradations related to volcanoes or any other natural event.
Can you help resell the private Villa in the future?
Yes! 84% of our clients are repeat clients. The market in Ubud had appreciated 10% annually between 2013-2017 and accelerates to 14% increase in 2018. Some expats who lived or rented their property for 10 or 15 years want to realize their gains and sell their private villa and gain a significant profit. We will work with you to sell your private Villa in Bali when you chose to do so.
What is the legal fee to complete the purchase?
The legal fee of the Notary is a standard fee and fixed at 1% of the value of the transaction ($1,000 for a $100,000 purchase price)
What costs should I face after the purchase?
The operating costs are as follows:
- An annual property tax – 0.01% of value ($83/month)
- Management fees - Includes staff to service guests (check in and out renters), daily cleaning of villa, cooking, water, electricity, Internate/wifi, pool maintenance. ($250/month)
- Insurance – if you wish to have one
- Ongoing variable fixing costs to maintain the Villa
In case of resale of the private Villa, does the state levy taxes on the gain?
The amount of tax levied after the resale of real estate in Indonesia is 10% of the amount declared.
Who takes care of the private Villa on a daily basis and fix things if needed?
The management staff are taking care of the private Villa on a daily basis. They clean the Villa daily and will cater to any issue they find or that your renters notify them about.
The staff is on-premise so they manage all aspects of the daily operation of your villa so you can enjoy life in your home country and just see your investment generating passive income and appreciate in value.
The staff will service your short-term rental guests (check in and out, 24/7), They’ll clean the villa daily, maintain the pool and the surrounding grounds with full gardening services and can even cook breakfast for your guests in the Villa. They will also fix anything that need maintenance, including plumbing, electricity and any construction related issue.
I am retired, what are the benefits to retire in Bali?
Many pensioners, who worked hard during their life prefer to spend their retirement in a convenient climate, under the sun in an affordable place that enables them to stretch their savings longer.
Bali is one of the most popular destinations for retirees. Living in Bali means spending a sweet life in a nice and beautiful country.
As a person fifty-five or over, you are eligible for a Retirement KITAS, a special type of visa. As with almost all other visas, you are not allowed to work or even volunteer in Indonesia. You must have a source of income sufficient assets that can assure the government that you can support yourself.
It’s good to come with a hobby, or interest, like writing, painting, sport or cooking, for instance so you can practice your hobby while in Bali. But even if you don’t have anything in mind, you’ll be able to find many outside entertainments.
Bali and its island life offer a slow and gentle way of living, as opposed to the fast-paced environment in the western world that you may be accustomed to. You’ll get used to people not rushing to get things done and still content with that pace of daily life. Take time to adjust to some of the cultural differences.
The beautify of the Island, the kindness of the locals, the in-expensive cost of living and it’s closeness to other Asian countries to which you can easily travel to, makes Bali a preferred retirement destination.