Taxes in Bali: How to Calculate and Optimize Taxation When Buying and Renting Real Estate

1. What Taxes Does an Investor Pay When Buying Property in Bali

Buying property in Bali, regardless of its form (leasehold or freehold), comes with mandatory tax obligations. The main taxes include:

• BPHTB (Bea Perolehan Hak atas Tanah dan Bangunan) — Land and Building Acquisition Duty. The rate is 5% of the property’s cadastral value (Nilai Perolehan Objek Pajak / NJOP). This tax is mandatory even for transactions between individuals.
• PPN (Pajak Pertambahan Nilai) — Value Added Tax (VAT). Applies when purchasing from a developer or a legal entity registered as a VAT payer. The rate is 11% of the property value.
• PPh Final (Pajak Penghasilan Final) — Final Income Tax on sales. Usually paid by the seller, but in some cases may be included in the price and effectively borne by the buyer. The rate is 2.5% of the sale price.

These taxes should be considered when calculating the total entry cost of a project. They may also influence the choice of deal structure — whether through a company, an individual, or a local nominee.

2. Taxes Applicable When Renting Out Property

If an investor rents out a property (short-term or long-term), they must account for income taxation.

The main tax in this case is:
Rental Income Tax (PPh Final) — 10% of gross revenue, not net profit. In other words, the tax is calculated on total rental income without deducting management, repair, or depreciation costs.

If the property is rented out through a management company, in most cases it withholds and remits the tax to the tax office automatically. However, the owner remains legally responsible for ensuring the tax is paid.

In some cases, management companies use their own licenses and issue rental contracts under their name, which may alter the taxation scheme.

3. How Taxes Affect the Investor’s Net Profitability

To objectively assess investment potential, one must consider not only potential rental income but also tax obligations. This is essential for calculating Net ROI (Return on Investment).

Example:
If a property generates $25,000 per year:

• 10% will go toward rental income tax ($2,500)
• The investor may also incur costs for management, maintenance, insurance, and utilities

As a result, actual income may differ from the expected figure by 20–30% if taxes are not factored in. Therefore, before purchasing, investors should either use pre-made ROI calculation templates or consult with a financial advisor.

4. Legal Structures and Their Impact on Taxation

Investors can reduce their tax burden or simplify administration by choosing an appropriate legal structure. In Bali, several approaches are available:

• Purchase through a local nominee (Indonesian citizen) — requires notarized agreements and powers of attorney. This option involves certain risks but is often used for leasehold transactions.
• Establishing a PMA company (Penanaman Modal Asing) — a foreign-owned company with the legal right to own and lease property. It is safer but more expensive and administratively complex.
• Long-term lease (leasehold) with management company involvement — a popular option where the management company leases the property and handles rental operations and tax payments.

The chosen legal structure affects not only the ownership model but also the taxation system and eligibility for tax benefits.

5. Liability for Non-Payment of Taxes

Failure to comply with tax obligations in Bali can lead to:

• fines and penalties;
• prohibition on officially renting the property;
• income being blocked by the management company;
• difficulties in resale or lease renewal.

Since 2024, Indonesian tax authorities have strengthened control in tourist areas, including Berawa, Canggu, and Seminyak. Data from Airbnb and Booking.com are now used to monitor rental activity, and official inquiries may be sent to property owners and management companies.

Conclusion: Invest Consciously — Taxes Can Be Managed

Taxes are not a barrier but an integral part of the investment process. With proper planning, the right management company, and ROI calculations that include all obligations, you can:

• clearly understand your net profitability;
• plan payments in advance;
• avoid fines and risks;
• rent out your property with peace of mind and stable income.

If you’re planning to invest in Bali real estate, don’t just focus on villa photos and projected profits — make sure you fully understand the tax structure and legal responsibilities.

Submit a request, and we’ll prepare a personalized calculation for you — including all taxes, payments, and net profitability!