Understanding Taxes on Bali Real Estate: A Brief Guide

Bali’s real estate market continues to attract investors from around the world, but navigating the tax landscape is crucial to ensure a smooth transaction. Below are the key taxes that real estate buyers and sellers need to be aware of when dealing with property in Bali.

1. Land and Building Acquisition Duty (BPHTB)
When purchasing freehold property in Bali, buyers are required to pay a tax known as BPHTB. The current rate is 5% of the transaction value, subject to certain cases also can be based on the government assestment value of the property, but only on the portion that exceeds IDR 60 million (the non-taxable threshold). This tax applies whether the property is purchased by an individual or a legal entity.

2. Income Tax on Property Sales (PPh)
Freehold property sellers are subject to a 2.5% income tax (PPh) based on the property’s sale price or subject to certain cases also can be based on the government assestment value of the property. This tax applies to both foreign and Indonesian sellers.

Leasehold property sellers are subject to a 10% income tax (PPh) if they hold an Indonesian Tax Registration Card (NPWP), based on the property’s sale price. Sellers without an NPWP are subject to a 20% income tax (PPh) on the sale price.

This tax applies to both foreign and Indonesian sellers, and it is typically deducted from the sale proceeds and must be paid at the time of the transaction.

3. Annual Land and Building Tax (PBB)
Once a property is acquired, the owner is responsible for paying the annual land and building tax (PBB). This is a relatively low tax compared to international standards and is calculated based on the assessed value of the property, generally ranging from 0.1% to 0.3% of the property’s taxable value.

4. Luxury Goods Sales Tax (PPnBM)
If the property being purchased is classified as luxurious, such as high-end villas, a luxury goods sales tax (PPnBM) may apply. This tax can be as high as 20%, depending on the property’s value and classification. However, this tax usually only affects high-end or exclusive properties.

5. VAT on Commercial Properties
For commercial properties such as hotels or retail spaces, a 11% value-added tax (VAT) is imposed. This typically applies to businesses or developers selling newly constructed properties.

6. Foreign Ownership Structures and Taxes
Foreigners cannot directly own freehold property in Bali, but they do have options to acquire property through leasehold agreements or via an Indonesian legal entity. If structured through an Indonesian company, corporate income taxes and other business taxes may apply.

Conclusion
While Bali remains a highly attractive real estate market, understanding and preparing for taxes is a key part of the investment process. Consulting with a local tax advisor or property expert is essential to ensure compliance and optimize tax efficiency in your property dealings.