Starting Villa Rentals in Bali with Local Company Setup

How to Earn Money through Villa Rentals Business in Bali

  • InCorp Editorial Team
  • 18 June 2024
  • 6 minutes reading time

Achieving passive income is a universal goal, especially when you are a foreigner living in Indonesia. For many, starting a Bali villa rentals business is an attractive path to attain this goal. 

You can enjoy consistent growth for your income while being immersed in the enchantment Bali has to offer. In this article, we’ll explore how foreigners can legally establish and operate a villa rental business in Bali without exposing themselves or their investments to risks. 

We’ll also provide insights into the profit potential of investing in Bali and crucial considerations for success.

The Profit Potential of Long-Term Bali Villa Rentals

Bali’s allure as a tourist destination has propelled the demand for villa rentals to unprecedented heights. In 2018, the island welcomed a staggering 6.5 million foreign tourists, marking an 8% increase in just one year. 

The influx of digital nomads and aspiring entrepreneurs seeking Bali’s unique ambiance has fueled a soaring demand for accommodations, with villa rentals occupying a prominent position. Foreigners, whether they intend to visit briefly or establish permanent roots, are drawn to Bali’s paradise-like atmosphere.

Can You Make Money from Renting Villas in Bali?

Bali’s natural beauty and cultural richness make it a dream destination for many. Owning or managing a villa here can be both a personal sanctuary and a source of income. 

Let’s delve into the Bali villa rental market to gauge its profit potential and what you should consider if you contemplate villa ownership or management on the island.

1. Bali Villa Rental Market

Investing in Bali’s tourism industry continues flourishing, attracting millions of visitors annually. Villas, offering luxurious and personalized accommodations, cater to travelers seeking privacy and unique experiences.

2. Earning Potential

During peak tourist seasons, high demand translates to substantial rental income. The type, location, and size of your villa are pivotal factors influencing potential earnings. Ensure you have everything planned before starting your Bali long-term rental business. 

3. Factors Affecting Profitability

Location significantly matters; villas in prime areas like Seminyak, Ubud, and Canggu command higher rental rates. Effective property management, encompassing marketing, maintenance, and guest services, can optimize profits. 

Bali’s villa rental market is competitive, so differentiation is paramount. Seasonal fluctuations in income are expected, with peak periods yielding the highest returns.

Indonesian law restricts foreign property ownership, but viable legal solutions exist. Proper licensing is critical to avoid legal complications when renting out your villa.

Challenges for Bali Rental Business

Bali’s economy can be influenced by global events, impacting tourism and property values. Maintaining your villa’s quality demands ongoing upkeep and renovations. Staying informed about changing regulations that could affect your business is essential.

How to Earn Passive Income from Property Investment in Bali

Bali offers more than just a tourist paradise. It’s a realm where savvy investors can weave a tale of financial success through property investment. Find out the secrets of earning passive income from your Bali property investments.

The Potential of Investing in Bali

Bali’s bustling tourism industry remains irresistibly attractive to global visitors, presenting abundant opportunities for property investors. Discover how to leverage your Balinese property for a steady stream of passive income.

Creating Streams of Passive Income

Imagine owning a piece of Bali—a private villa nestled amid lush surroundings. Now, envision transforming this serene haven into an income-generating gem. Villa rentals are the heart of Bali’s property investment scene, capturing tourists searching for an authentic Balinese experience. But the story doesn’t end there—long-term rentals and the promise of property appreciation await.

Location is paramount in this enchanted land. Your journey begins with selecting the perfect setting—Seminyak’s energy, Ubud’s artistic haven, or Canggu’s coastal allure. Yet, that’s just the start. 

Effective property management, from crafting enticing marketing strategies to ensuring seamless guest experiences, is vital to maintaining a steady income. Compliance with Indonesian property regulations is crucial to stay on the right side of the law.

Exploring Investment Strategies

Bali offers various investment strategies, whether you seek long-term rental income or quick gains through property flipping. Consider fractional ownership to collaborate with others on high-end properties. Earning passive income through property investment in Bali is akin to penning your adventure. 

It’s a promising quest that demands knowledge, dedication and an eye for detail. Whether you’re a seasoned explorer or just embarking on your first journey, Bali’s allure promises a breathtaking backdrop and an opportunity for a life-changing investment experience.

Foreign Ownership of Property in Bali

Regrettably, Indonesia’s Positive Investment List does not encompass villa rentals for foreigners. However, as a foreign investor aiming to establish a villa rental business in Bali, you can still do so legally through a local company.

Local Company

You can operate your villa rental business through a local company without complications. This entails partnering with a trustworthy third party to manage the villa business via a local company. This approach offers the quickest path to profitability for foreigners entering this sector.

Through the expertise of InCorp, we ensure your rights as a company beneficiary are safeguarded through a loan agreement, with InCorp facilitating the purchase of shares in the local company through the beneficiary-provided loan. Engaging in individual shareholder/director/commissioner arrangements in Bali without a reliable third party and proper agreements could expose you to significant risks, as there may be no written protection, and trust dynamics can change unpredictably.

Requirements for Villa Rentals in Bali

If you decide to venture into the villa rental business, you must fulfill specific requirements:

  • The minimum land size for a villa in Bali is 1,000 m2.
  • There is no specific minimum or maximum requirement for room size, but a villa can have a maximum of 25 rooms.
  • The villa’s structure must comprise different units, each housing several rooms. Please note that “rooms” are distinct from hotel rooms in this context.

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Start Investing in Bali with InCorp Indonesia

Contact us for comprehensive insights into long-term villa rentals in Bali and assistance with the local company setup. Our professional consultants are ready to guide you through the process. Please fill out the form below to help us navigate your first property investment. You’re also welcome to visit our Bali office for personalized assistance.

Verified by

David Susandi

Branch Manager – Bali Office at InCorp Indonesia

Holding 11 years of experience in various roles, including project manager, operational manager, and corporate strategist, David Susandi is a prominent figure for many entrepreneurial organizations expanding in Indonesia.

Frequently Asked Questions

    Limited liability company with 100% local/domestic direct investment

    The investment requirement for PMA companies in Indonesia varies based on their classification under the Indonesia Industrial Standard Classification (KBLI). Generally, a minimum investment of IDR 10,000,000,000 (ten billion Indonesian Rupiah), excluding investment in land and buildings, is needed to conduct one business activity in one location.

    According to Presidential Regulation No. 10/2021 and the amended version, all businesses are open for domestic and foreign investment with these limitations and classifications:

    • Eight businesses are closed to foreign investment and may be operated by the central government.
    • Designated business sectors or joint ventures with cooperatives (koperasi) and micro, small, and medium enterprises
    • Open businesses are subject to specific conditions, such as those that are exclusively available to 100% local investors, those with restricted foreign shareholding, and investments requiring special licenses

    Certain sectors are closed to foreign investment, including narcotics cultivation, gambling, and environmental conservation activities.

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

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Disclaimer

The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

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