What Property Taxes Do Foreigners Pay in Bali?

In Indonesia, property ownership comes with both annual and transaction-based taxes. Rental income is also subject to taxation. Additionally, various financial costs can reduce the profitability of real estate investments, as noted by Amara.

Annual Taxes

Land and Building Tax (Pajak Bumi dan Bangunan - PBB)
All property owners in Bali must pay Pajak Bumi dan Bangunan (PBB), which applies to both land and any structures on it. This tax is calculated separately for each property.

PBB is a progressive tax, meaning the amount increases depending on the property's value. For example:

If the price is above 200 million IDR ($13,560), the tax rate is 0.01%.
For properties valued over 10 billion IDR ($678,000), the tax can increase up to 0.30%.
If a property is used for non-commercial purposes, such as education, social services, or healthcare, the owner may qualify for a 50% discount on PBB. This incentive is intended to reduce the tax burden for organizations that benefit the community.

PBB must be paid annually to the Directorate General of Taxes to avoid penalties and maintain the legal status of property ownership.

Taxes for Landlords

Rental Income Tax (PPH)
If a property owner rents out real estate in Bali, they must pay Rental Income Tax (PPH). This tax is calculated as a percentage of gross rental income.

For Indonesian tax residents (both locals and foreigners meeting residency criteria), the tax rate is 10%.
For non-residents, the tax rate is higher at 20%.
It is important to note that PPH is separate from personal income tax. A landlord may be subject to both taxes. PPH must be paid annually and declared in tax filings to ensure compliance with Indonesian law.

Foreigners who own rental properties through a PT PMA (a foreign-owned company) do not pay PPH but instead are subject to Corporate Income Tax at a fixed rate of 22%.

This tax must be declared and paid annually.
The tax return must be filed by the end of the fourth month following the tax year.
Payments are typically due by the 15th of the following month.
This structure ensures that all property-related income is taxed properly and helps companies comply with tax obligations efficiently.

Personal Income Tax

Personal Income Tax in Bali applies to Indonesian taxpayers and foreigners residing in Indonesia for more than 183 days per year.

This progressive tax increases with income levels:

5% for income up to 60 million IDR ($3,660).
35% for income exceeding 5 billion IDR ($305,000).
Both Indonesian citizens and foreign tax residents are obligated to pay personal income tax, which applies to:
- Rental income
- Capital gains
- Salaries
- Dividends, interest, and royalties (whether earned domestically or abroad).

Filing Requirements:
- Tax returns must be submitted annually.
- The deadline is the end of the third month after the tax year.
- Taxes must be paid by the 15th of the following month.
- Meeting these deadlines is crucial to avoid penalties and ensure compliance with Indonesian tax regulations.

Other Taxes

Land Acquisition Tax
When purchasing real estate in Bali, buyers must pay a 5% tax based on either:

The transaction value or
The appraised property value (whichever is higher).
This tax applies to all real estate transactions, including villas and residential properties. However, if the seller is a developer selling basic homes or apartments, the tax rate is reduced to 1%.

Transfer Tax (BPHTB - Land and Building Ownership Transfer Tax)
This 5% tax applies to the sale price of real estate.

Additionally, if the property is classified as luxury real estate (such as high-end villas or premium apartments), the buyer must pay a 20% Luxury Sales Tax (LST).

Land Acquisition Tax and Transfer Tax are typically one-time payments made at the time of purchase.

Construction Tax
This 2% tax is based on:

The total construction budget (Rancangan Anggaran Biaya - RAB) or
20% of VAT (Value Added Tax).
The responsibility for paying this tax lies with the project supervisor, such as:

The contractor overseeing the construction.
If the property owner manages the construction, they must pay the tax themselves.
This tax is usually paid upon project completion. Timely payment is essential to avoid legal complications and obtain necessary building permits.

Value Added Tax (VAT - PPN)

This 10% VAT applies when buying real estate from a commercial developer.

VAT is usually included in the sale price and paid by the buyer.

It applies to new homes, villas, or apartments purchased directly from developers.
Buyers should budget for this additional cost, as it significantly impacts the final purchase price.
VAT is typically paid at the time of purchase and is a mandatory part of property ownership registration in Bali.

Legal and Additional Costs

When transferring property ownership in Bali, official representatives from the National Land Agency (BPN) or local authorities must be involved. These may include notaries and legal professionals:

Their fees typically amount to 1% of the property value.
This ensures the transaction meets legal standards and the ownership transfer is properly registered.
If a real estate agent is hired for searching and negotiating a deal, their fee is approximately 5% of the property value.

The seller usually covers this commission, but buyers should also factor it into their budget.
Document Legalization Tax (DST)
This applies to legal documents related to property transactions, including:

Sales contracts
Lease agreements
Ownership transfer documents
Fixed fee: 10,000 IDR (~$0.70 USD) per document, paid by the party signing or transferring the document.

Risks of Buying and Developing Property in Bali

The Indonesian government is tightening regulations for foreigners and conducting more inspections. Recently, the police arrested 53-year-old German citizen Andre Frey, the founder of PARQ Ubud, a luxury apartment complex in Bali. Local residents referred to this area as a "Russian village."

The issue: Construction was carried out on agricultural land, where building is illegal without a special permit. The business owners lacked the necessary licenses, leading to the closure of the complex.

Frey was charged with violating land use regulations, as he "deliberately converted fertile farmland" in Ubud into villas, spas, and tourist facilities without proper authorization. Such actions are considered criminal offenses.

Government Crackdown on Property Development

The Bali villa boom, which surged after the COVID-19 pandemic, has been a growing concern for both locals and authorities. Each year, an estimated 1,000 hectares of farmland are lost due to real estate development.

The closure of PARQ Ubud signals stricter enforcement against unregulated development. The Bali government previously proposed [url=https://internationalinvestment.biz/real-estate/4594-na-bali-zapretjat-stroitelstvo-novyh-otelej-vill-i-razvlekatelnyh-klubov.html]banning** the construction of new hotels, villas, and entertainment venues.