Embarking on the journey of investing in Bali real estate is an exciting endeavor for Australian investors, yet it inevitably comes with a multitude of questions and uncertainties. As a prominent property management company in Bali, Bukit Vista has been at the forefront of this intersection between Australian investors and the captivating Bali property market.
Hi I’m Adiel! I have spent countless hours researching the real estate investment environment in Bali and get to know property investors during my time at Bukit Vista, including Australians.
Over time, we’ve received countless inquiries from property owners and investors Down Under, each seeking clarity on the intricacies of investing in Bali. In this blog post, we’ve distilled the wisdom gained from our experiences, compiling some of the most frequent and pressing questions raised by Australian investors. Join us as we unravel the mysteries and provide valuable insights to guide you through the nuances of investing in Bali real estate.
Table of Contents
Legal Documents and Requirements for Investing in Bali Real Estate as an Australian Investor
Navigating the legal landscape of investing in property in Bali as an Australian investor can be a complex process. To ensure a smooth and secure transaction, it is crucial to understand the necessary legal documents and requirements.
PT PMA (Penanaman Modal Asing)
A PT PMA is a foreign-owned limited liability company in Indonesia. It is the most common legal structure used by foreign investors to purchase property in Bali. This is because it allows foreigners to hold the Hak Guna Bangunan (HGB) or Hak Pakai (HP) title, which gives them the right to build on or use the land for up to 80 years.
Kitas (Kartu Izin Tinggal Sementara)
A Kitas is a temporary residency permit for foreign nationals in Indonesia. It is mandatory for Australian investors who intend to stay in Bali for more than 60 days. The Kitas application process involves submitting various documents, including your passport, visa, and proof of financial means.
Pondok Wisata (Tourism Accommodation Business)
If you are planning to purchase a property in Bali for the purpose of operating a tourism accommodation business, you will need to obtain a Pondok Wisata permit. This permit is issued by the local tourism office and allows you to legally operate your business.
To process the Usaha Pondok Wisata there are 5 documents which need to be submitted by the Owner of the Villa :
- Document of UKL – UPL: (Environmental Management and Environmental Monitoring Effort Effort / Management System and Monitoring for Environment)
- Document IMB (Change of the Function)
- Document of SITU / HO: (Disruption Dispensation Permit)
- Document of Tanda Daftar Perusahaan (Business License)
- NPWPD Number (Tax Number)
Due Diligence: Researching Bali Zoning Regulations & Advisory Services
Before investing in any property in Bali, it is also essential to conduct thorough due diligence. This includes researching the property’s title history, zoning regulations, and any potential encumbrances. It is also advisable to consult with a local lawyer or real estate agent to ensure that your investment is compliant with all applicable laws and regulations.
To assist you in navigating this legal terrain, our advisory and legal service partners are equipped with the expertise to guide you through the entire process. They can assist with everything from property title verification and tax planning to drafting contracts and obtaining necessary permits. Their expertise can help you make informed decisions and navigate the legal procedures with confidence.
Will Australian Property Investors Face Double Taxation in Indonesia and Australia?
Australia and Indonesia have a Double Tax Agreement (DTA) in place to prevent double taxation of income earned in both countries. This means that Australian property investors who own rental properties in Indonesia will be able to claim a foreign tax credit for the Indonesian tax they pay on their rental income.
However, there are some limitations to the DTA. For example, Indonesian tax authorities may still impose a final withholding tax on rental income paid to Australian residents. Additionally, Australian tax laws may still apply to the rental income, even after the foreign tax credit has been claimed.
It is therefore important for Australian property investors to seek professional advice to ensure that they are compliant with all applicable tax laws in both Australia and Indonesia. Our advisory and legal service partners can provide you with the expert guidance you need to navigate the complexities of international taxation and ensure that you are maximizing your after-tax returns.
We recently sat down with our partner and property investor from Australia about investing and building a villa in Bali
So What are the Steps to Invest in Bali Real Estate?
Investing in Bali real estate involves several key steps to ensure a smooth and legally compliant process. Here’s a general guide to help Australian investors navigate the intricacies of investing in Bali:
1. Conduct Thorough Market Research:
Before diving into the market, conduct extensive research on the Bali real estate market. Understand the market trends, property values, and potential risks and returns is crucial in determining whether to invest or not in Bali real estate. Finding a knowledgeable and experienced real estate agent can also assist you in navigating the Balinese property market, finding suitable properties, and handling negotiations.
2. Legal Considerations:
Familiarize yourself with Indonesian property laws and regulations. Ensure you understand the different types of land titles, zoning regulations, and foreign ownership restrictions. Seek legal advice to navigate these complexities.
3. Establish a Legal Entity:
Foreign investors typically need to establish a foreign-owned company (PT PMA) to hold and control property in Indonesia. Consult with legal and business professionals to set up the necessary legal entity.
4. Obtain Necessary Permits:
Secure the required permits for property ownership and operation. This may include the Pondok Wisata license if you plan to rent out your property as a holiday rental. And KITAS if you plan to stay in Bali for more than 60 days.
5. Due Diligence on the Property:
Before finalizing any transaction, conduct thorough due diligence on the property. Verify the ownership status, legal encumbrances, and any outstanding obligations tied to the property. You can consult with local lawyers and real estate experts to assess the property’s legal and market standing.
6. Negotiate and Finalize the Purchase:
Once you’ve found the right property and conducted due diligence, negotiate the terms of the purchase with the seller. Your real estate agent can assist in drafting contracts and ensuring your legal interests are protected.
7. Complete the Legal Process:
The final step involves completing the legal formalities of the purchase, including transferring the property title to your PT PMA, paying taxes, and registering the property with the relevant authorities. Complete the transfer of ownership according to Indonesian regulations and ensure compliance with tax regulations in both Indonesia and Australia.
8. Property Management:
Consider engaging a reputable property management company to handle day-to-day operations, especially if you plan to rent out the property.
Is it better to buy or build a property in Bali for investment?
The decision to buy or build a property in Bali for investment depends on various factors, and both options have their pros and cons. Here are some considerations to help you make an informed decision:
Buying a Property:
Immediate Returns: Buying an existing property allows you to generate rental income or use the property for your purposes immediately.
Reduced Time and Effort: The process of purchasing an existing property is generally faster and requires less personal involvement compared to building from scratch.
Known Costs: With an existing property, you have a clearer understanding of the total cost upfront, including the purchase price and any renovations needed.
Limited Customization: You may have limited control over the design and features of the property compared to building a new one.
Renovation Costs: If the property requires renovations or updates, these costs should be factored into your budget.
Building a Property:
Customization: Building allows you to tailor the property to your preferences, potentially making it more attractive to renters or for your own use.
Potential Cost Savings: Building from scratch might be more cost-effective in some cases, especially if you can find a good deal on land.
Newer Infrastructure: A newly built property often comes with modern infrastructure and design, potentially requiring fewer repairs in the short term.
Time-Consuming: The construction process can be time-consuming, and delays are not uncommon. This may delay your ability to generate income from the property.
Unforeseen Costs: Construction projects can sometimes encounter unexpected costs, and managing a construction project from a distance may present challenges.
Market Risks: The property market can change during the construction period, potentially affecting the property’s value.
Our contractors and real estate partners can help you build and find your dream property
In conclusion, delving into the realm of Bali real estate as an Australian investor sparks a myriad of questions, each crucial to ensuring a successful and sustainable investment. From legal considerations and tax implications to the decision to buy or build, the journey is multifaceted.
By addressing these common questions head-on, Australian investors can navigate the complexities of Bali property market with confidence. As a property management company with a wealth of experience in Bali, Bukit Vista is committed to providing valuable insights and support to guide investors through the intricacies of their ventures. Armed with knowledge and the right partners, Australian investors can embark on their Bali real estate journey with informed decisions, mitigated risks, and the potential for prosperous returns.