Bali has long been a dream destination for property investors seeking tropical paradise whether for personal use, rental income, or long-term investments. However, purchasing a property in Bali is not as straightforward as it seems. Beyond the property’s price tag, there are several hidden costs that potential buyers should prepare for. Failing to account for these can turn a seemingly affordable purchase into an unexpected financial strain.
This comprehensive guide outlines the hidden costs of buying a property in Bali, offering practical insights to help you prepare financially, avoid costly mistakes, and achieve your dream of owning a property in this tropical haven without the unexpected “additional” financial burdens.
Bali Real Estate Expenses Guide
While property prices in Bali might initially seem affordable, hidden costs can quickly add up, oftentimes making purchases heavy. These additional expenses, detailed below, are vital to consider when budgeting for property investment.
Legal Fees and Property Investment Documents
One of the most significant hidden costs when buying property in Bali is the legal fees. Engaging a reputable notary or legal consultant is essential, as they ensure your transaction complies with Indonesian property laws. Skipping these steps to save costs may lead to disputes or even losing your investment. These fees can include:
- Title search fees: Ensures the property has clear ownership and no disputes. This notary fee is typically 1-2% of the property’s total value and can be further negotiated to around 0.5-0.75% of the transaction value.
- Drafting agreements: This is for creating leasehold contracts or purchase agreements. This usually costs around 0.5-1% of the property’s total value.
- Due diligence costs: Used to verify the property’s zoning and land use permissions. This can range from $1000 to $5000, depending on the property’s complexity, and can take a few weeks to a couple of months to produce.
For foreign buyers, it’s crucial to understand that direct ownership of freehold property is not permitted in Indonesia. Many opt for leasehold agreements, nominee structures, or establishing a foreign-owned company (PT PMA), all of which incur additional legal fees.
Tax Obligations
Taxes are another expense that can add up quickly. Buyers must account for:
Property Acquisition Tax (BPHTB or Bea Perolehan Hak atas Tanah & Bangunan)
The BPHTB is a 5% tax levied on the assessed value of the property, known as the Tax Object Acquisition Value (Nilai Perolehan Objek Pajak, or NPOP), which is determined by local authorities to ensure fairness and transparency in the transaction. This tax applies to property transfers, including sales, inheritance, gifts, mergers, and discounted grants. For this tax, it is essential to report the property value accurately to avoid penalties or delays.
Payment of the BPHTB is required within two months of the transaction, else a 2% monthly penalty will be added to your total unpaid amount. Tax rates can vary depending on location and seller status, although there are certain exemptions such as property transfers due to marriage. For accurate calculations, it is advisable to consult a notary or tax expert.
Land and Building Tax (PBB or Pajak Bumi & Bangunan)
Paid annually, this tax is calculated based on the Tax Object Selling Value (Nilai Jual Objek Pajak, or NJOP), which represents the property’s market value as determined by the local government. Rates typically range from 0.1%–0.2% for land and 0.5% for buildings, but they can increase to 0.3%–0.5% for residential properties or 0.6%–1% for commercial properties, depending on the NJOP and property type.
The local government collects PBB to fund infrastructure and public services, making it a recurring expense that property owners must budget for. Higher NJOP values or premium locations can lead to significantly higher PBB costs, especially for high-value or luxury properties.
Income Tax (PPH or Pajak Penghasilan)
PPH is a tax the seller must pay on profits earned from the sale of a property. This tax is generally 2.5% of the transaction value, but the calculation also considers the profit margin — the difference between the selling price and the original purchase cost, including any relevant expenses.
The PPH rate can also vary based on how long the property has been owned and other factors outlined in Indonesia’s tax regulations. To avoid complications during the ownership transfer, it is highly advisable to consult a tax professional to oversee the process and for the buyer to meticulously verify that PPH has been settled by the seller prior to purchasing the property.
Rental Property Tax
Rental property taxes or lease taxes are based on the gross rental income earned from the property. For tax residents in Indonesia, a Lease Tax of 10% is levied on the rental income whereas the tax rate for non-tax residents is higher, at 20% of the lease value.
Note: Foreigners tagged as Indonesian tax residents are those present in Indonesia for more than 183 days in any 12-month period or during a fiscal year with the intention to reside in the country.
Luxury Sales Tax (PPnBM or Pajak Penjualan atas Barang Mewah)
PPnBM is a tax applied to high-end properties, such as luxury villas and premium apartments. In Bali, this tax is generally 5% of the transaction value, which includes the purchase price and other related costs. Both new and second-hand luxury properties may be subject to this tax, though specific rules can vary based on the type of property and its assessed value.
Note: Buyers typically bear the responsibility for this one-time tax, but in some cases, sellers may contribute to the payment.
Value-Added Tax (PPN or Pajak Pertambahan Nilai)
PPN is the 10% tax applied to the sale of newly constructed properties, including houses, apartments, and commercial buildings. This tax is calculated based on the total transaction value, including administrative and notary fees. PPN may also apply to leasehold agreements, where tenants are required to pay PPN on top of rental payments.
However, it is important to understand that not all transactions are subject to PPN. For example, pre-owned properties, property transfers between family members, or those resulting from inheritance are generally exempt. Buyers should check whether PPN is included in the purchase price or the property to avoid unexpected costs.
Capital Gains Tax
When selling property in Bali, a capital gains tax of 2.5% is levied on the transaction value or the taxable sale value, whichever is higher. For foreigners, this can go up to 5% of the gross proceeds, unless a tax treaty, such as a Double Taxation Avoidance Agreement (DTAA) between their home country and Indonesia, reduces the rate.
To minimize this tax burden, sellers should maintain thorough records of purchase costs, renovation expenses, and other relevant expenditures. For this, consulting with a tax advisor can help optimize an exit strategy when needed and ensure compliance with Indonesian tax regulations.
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Building Permits (IMB, PBG, and SLF)
If you plan to construct or renovate a property in Bali, obtaining the appropriate building permits is essential to ensure legal compliance and avoid fines or demolition. These permits verify adherence to safety, environmental, and structural standards, securing your investment and ensuring a smooth process.
IMB (Izin Mendirikan Bangunan)
Required for general construction, an IMB confirms that the building plans align with zoning and land-use regulations. It also acts as a registration document that outlines the intended use of the building.
IMB certificates are issued by the Dinas Cipta Karya or Dinas Tata Ruang Kota dan Pemukiman (Department of Town Planning and Settlements) and typically come with a metal plate that should be displayed at the front of the building. However, before you can get the IMB permit, there are several documents you need to gather, including:
- Land certificate with a survey plan
- Proper land zoning and building plans
- A sketch of your proposed building
- Signed consent from the owners of the neighboring properties
In Bali, IMB processing can take more than 3 months and costs approximately IDR 8,500,000 depending on the property type, size, and location. Generally, IMBs are shouldered by the owner of the building but for leased or rented properties, the landlord takes on that duty. Just be sure that if you’re looking to buy or lease a building, it already has the IMB certificate and plate; otherwise, you might face future issues. And if you plan to repurpose your building in the future, you’ll need to update the purpose stated in your IMB.
PBG (Persetujuan Bangunan Gedung)
PBG is a licensing requirement that outlines how buildings should be built. It mainly focuses on environmental and structural compliance, ensuring that construction meets local and ecological guidelines. This means you cannot start any construction unless you’ve applied for and received your building approval permit.
In Bali, applications for the PBG and SLF can be made through the Building Management Information System (Sistem Informasi Manajemen Bangunan Gedung or the SIMBG), which is organized by the Ministry of Public Work and Public Housing. The cost for a PBG permit in Bali can vary depending on the project’s size, location, and type of construction, but usually starts at around IDR 50,000,000 for an average-sized property. You must also need to provide the following upon applying:
- Proof of land ownership
- Identity certificates for the building owner
- Proposed architectural design
- A detailed sketch of the building structure
Keep in mind that the processing time can stretch up to 8 months, so factor this upon planning your construction timelines, or you can speed things up by working with real estate experts.
SLF (Sertifikat Laik Fungsi)
Issued by the government after construction is complete, SLF (or the Certificate of Worthiness) confirms that the building is safe, suitable for its intended use, and conforms to the stipulations in the IMB and PBG certificates.
The application and the actual SLF certificate are free, provided you have applied for and paid for the PBG permit for your property. Just keep in mind that the SLF needs to be renewed every 20 years for residential buildings and every 5 years for commercial ones.
Furthermore, you must also submit several more documents in addition to those you provided with your PBG application:
- Soil test documentation
- Site border drawing
- Land/Building owner identity information (KITAS/KITAP)
- Spatial planning provisions (ITR/KRK/KKPR)
- Environmental documents
- And for foreigners, consultant or expert data and employment contract
Note: A PBG is mandatory before applying for an SLF.
Maintenance and Property Management
Owning a tropical property entails recurring costs for upkeep, such as pool cleaning, pest control, landscaping, and structural repairs. Depending on the property size and location, these expenses can cost about 10-20% of the total monthly rental income.
Lease Extension Costs
For leasehold properties, extending the lease beyond the initial 25–30 years can be expensive and requires negotiation with the landowner. Preparing for these costs is essential to preserve the property’s value and avoid surprises when the lease term ends.
Legal Risks and Penalties
Cutting corners by working with unlicensed agents or ignoring legal requirements can lead to severe penalties, including forfeiting your investment. Always collaborate with qualified professionals and adhere to Indonesian property laws to ensure a legitimate and secure purchase.
Agent Commissions and Administrative Charges
Hiring a real estate agent can simplify your property search, but their services come at a cost. Agent commissions in Bali typically range between 3-5% of the property’s purchase price. Additionally, you may face administrative fees for processing permits, title transfers, or other paperwork.
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Bali Property Additional Fees
For a more simplified look, here are the additional fees for your Bali property along with its estimated range in IDR:
| Category | Details | Estimated Cost in IDR |
|---|---|---|
|
Notary and Legal Fees
|
Title search, agreement drafting, and due diligence
|
0.5–2% of property value for fees + 16,000,000–80,000,000 for due diligence
|
|
Property Acquisition Tax (BPHTB) |
5% of NPOP (assessed property value)
|
Varies depending on the property value |
|
Land and Building Tax (PBB)
|
Annual tax: 0.1%-0.2% for land, 0.5% for buildings |
0.1–2% for land, 0.5% for buildings but varies based on property type, in general
|
|
Income Tax (PPH)
|
Tax paid on profits from the sale of the property |
2.5% of the transaction value
|
|
Rental Property Tax
|
Tax paid based from the gross rental income earned from the property
|
10% for taxpayers, 20% for non-tax payers
|
|
Luxury Sales Tax (PPnBM)
|
Tax on luxury properties (e.g. luxury villa, premium apartments)
|
5% of the transaction value (may vary based on property type)
|
|
Value-Added Tax (PPN)
|
Tax on newly constructed properties
|
10% of the transaction value
|
|
Capital Gains Tax
|
Tax on the profit from selling property
|
2.5%-5% of the gain
|
|
Building Permits
|
Required for construction on purchased land (IMB, PBG, and SLF)
|
50,000 to 50 million |
|
Lease Extension (if applicable)
|
Costs for extending leasehold agreements
|
Negotiable (often significant)
|
|
Maintenance and Property Management
|
Recurring costs for property upkeep (pool, landscaping, pest control)
|
10-20% of the total monthly rental income
|
|
Agent Commissions
|
Includes administrative fees and others
|
3%-5% of the purchase price
|
|
Miscellaneous
|
Legal penalties
|
Depends on the severity of the offense
|
Buying Tips for Bali Property Investments and Minimize Hidden Costs
To ensure a smooth purchase and avoid unexpected surprises, consider these tips:
- Work with trusted professionals: Engage reputable local experts for legal, financial, and property advice. While their fees may seem high, their expertise can help you avoid costly legal pitfalls.
- Create a comprehensive budget: Account for all costs, including legal fees, taxes, agent commissions, and property maintenance. Negotiate lease extensions and maintenance contracts upfront to minimize expenses, and always be transparent about the transaction price you declare to prevent delays or penalties. You can also set aside funds for annual upkeep to handle unforeseen expenses.
- Verify permits and titles: Confirm the property complies with local regulations and has proper documentation to avoid disputes in the future.
- Plan for the long term: Understand the terms of leasehold agreements, which typically span 25-30 years. Clarify renewal conditions and associated costs to secure your investment’s longevity.
Prepare an Exit Strategy: Most importantly, always learn about resale taxes and market risks so you know when and how to cash out your investment. There are several ways to do this but the most common ones are selling your property, doing the 1031 exchange, fix-and-flip, or the buy and hold.
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FAQ
No, Indonesian law restricts foreigners from owning freehold property. Alternatives include leasehold agreements, nominee arrangements (with significant legal risks), or forming a foreign-owned company (PT PMA). Each approach has specific requirements and costs, so it’s essential to consult with a qualified legal advisor to determine the best option for your situation.
Leasehold agreements in Bali usually last 25–30 years with options to extend. However, extension terms depend on negotiations with the landowner and may involve additional fees so this should be clearly outlined in the contract.
Yes, you’ll need permits like the Building Permit (IMB) or Environmental Building Permit (PBG) and must comply with zoning laws. Regulations vary, so working with local authorities or a consultant local experts is advised to ensure compliance.
It’s recommended to secure property insurance, which can cover damages caused by natural disasters, fire, or theft. If the property will be rented out, landlord insurance can provide additional protection against liabilities related to tenants. Consult a Bali-based insurer for a more tailored coverage.
Yes, foreign property owners renting out their properties must obtain a rental license and pay applicable taxes on rental income. Taxes include a 10% VAT on rental income and a 20% withholding tax if profits are repatriated overseas. Proper bookkeeping and compliance with local tax laws are critical to avoiding penalties.
Plan Ahead and Consider these Hidden Costs when Buying Property in Bali!
Investing in Bali real estate is a dream come true for many, but understanding the hidden costs of buying a property in Bali is essential to avoid financial pitfalls. By preparing for legal fees in property investment, taxes, commissions, and property maintenance, you’ll set yourself up for a smooth and rewarding purchase. Let this guide serve as your roadmap to navigating Bali’s property market with confidence and peace of mind.
Rasmus Holst is a serial entrepreneur and Co-Founder of COCO Development Group, where he helps drive innovation and growth through strategic business development. He is also the Co-Founder of Estate of Bali and Regnskabshelten.dk, Denmark’s fastest-growing accounting firm, which grew to 35 employees and generated $2.5M in turnover in 2023. Rasmus is passionate about building businesses that create long-term value and impact.
