How to Legally Rent Out a Villa in Bali: The 2026 Guide for Foreigners
By Pelangi Indonesia Consultancy
Owning a slice of paradise in Bali is a dream for many. However, turning that dream into a profitable rental business requires more than just listing your property on Airbnb. In recent years, the Indonesian government has tightened regulations regarding foreign ownership and business operations.1
At Pelangi Indonesia Consultancy, we often see investors caught off guard by the complexity of local laws. The “grey area” days are over; to ensure your investment is safe and profitable, you must operate 100% legally.
This guide breaks down exactly how to rent out a villa in Bali legally, covering ownership structures, essential licenses, and tax compliance.
1. Property Ownership: The Foundation
Before you can rent, you must secure the land correctly. As a foreigner, you cannot own Freehold (Hak Milik) property in Indonesia.2 Attempting to use a local “nominee” to bypass this is illegal and high-risk.
Here are the two legal paths for foreign investors:
Leasehold (Hak Sewa)
This is the most common method for individual investors.
How it works: You lease the land for a long term (typically 25–30 years, extendable up to 80+ years).3
Legal Standing: The lease is formalized in a notarized agreement. You own the building, but not the land.
Renting Validity: You can rent out the villa only if the appropriate operational licenses (see below) are attached to the property or your business entity.
Foreign-Owned Company (PT PMA)
For those serious about building a rental empire or ensuring maximum legal protection, a PT PMA (Perseroan Terbatas Penanaman Modal Asing) is the gold standard.4
How it works: You establish an Indonesian company that is 100% foreign-owned. The company then holds the “Right to Build” (Hak Guna Bangunan) or “Right to Use” (Hak Pakai) certificates.
Benefit: This structure allows you to legally hold business licenses in the company’s name, making tax and visa processing (KITAS) significantly smoother.
Pelangi Pro Tip: Never sign a lease agreement without a due diligence check. We verify land certificates to ensure the “owner” actually has the right to lease to you.
2. Zoning: Location is Everything
You cannot build a rental villa just anywhere. Indonesia uses strict zoning laws (Tata Ruang) to protect its landscape.
Tourism/Commercial Zones (Pink/Yellow): Your land must fall into these zones to legally obtain a rental license.
Green Zones (Agricultural): It is strictly illegal to build commercial villas here. If you build in a green zone, your operation can be shut down, and the building demolished.
Residential Zones: Strictly for living, not for commercial daily rentals.
Action Item: Before buying, check the RTRW/RDTR maps on the government’s Gistaru website or ask our team to perform a zoning check.
3. Essential Business Licenses and Permits
Simply owning the villa doesn’t mean you can run a business. You need specific operational permits.
NIB (Nomor Induk Berusaha)
This is your Business Identification Number, issued via the Online Single Submission (OSS) system. It acts as your company’s registration and basic import/customs identity.
Pondok Wisata (Homestay License)
This is the “Holy Grail” for villa rentals.
What it is: A license specifically for holiday rental villas with up to 5 rooms.
The Catch: Historically, this license was reserved for Indonesian citizens or local nominees.
The Solution: Foreigners typically utilize a PT PMA structure which allows them to obtain the equivalent accommodation licenses suitable for foreign investment, or partner legally with a local holder under a management agreement.5
Building Permits: PBG and SLF
The old IMB (Izin Mendirikan Bangunan) has been replaced. You now need:
PBG (Persetujuan Bangunan Gedung): Approval that your building design meets technical standards before construction.
SLF (Sertifikat Laik Fungsi): A Certificate of Functionality issued after construction, certifying the building is safe for guests.
Community Approval (Izin Tetangga)
Bali runs on community. You need a letter from the local Banjar (village council) and immediate neighbors approving your business. Without this, no official license will be issued.
4. Tax Compliance: Paying Your Fair Share
The Indonesian government is aggressively tracking tax avoidance on platforms like Airbnb and Booking.com.
| Tax Type | Rate | Description |
| NPWPD (Local Tax ID) | N/A | Your business must register for a Regional Tax ID. |
| PB1 (Hotel & Resto Tax) | 10% | This is a sales tax charged to the guest on top of the room rate. You must collect and remit this monthly. |
| Corporate Income Tax (PPh) | 22-25% | If operating via a PT PMA, this is the tax on your net profit. |
| Withholding Tax | Varies | Applicable on lease payments and service providers. |
5. Essential Steps for Compliance
Navigating this bureaucracy alone is overwhelming. Here is your checklist for peace of mind:
Engage Legal Professionals: Do not rely on “friends” for legal advice. Hire a reputable consultant like Pelangi Indonesia to draft robust lease agreements and handle the OSS system.
Verify Before You Pay: Ensure the land zoning is “Tourism” and that the PBG/SLF permits match the actual building structure.
Guest Registration: Local law requires you to report all foreign guests to the police/Banjar within 24 hours of arrival.
Operational Safety: Ensure your villa has fire extinguishers, first-aid kits, and proper waste management to meet SLF standards.
Ready to Rent Without the Stress?
The rules for renting out a villa in Bali are complex, but they protect your investment in the long run. Don’t risk deportation or property seizure by cutting corners.
Pelangi Indonesia Consultancy is here to handle the red tape for you. From PT PMA establishment and due diligence to tax reporting and Banjar relations, we ensure your business is 100% compliant.
Contact Us Today for a Free Consultation – Let’s make your Bali villa investment a success story.