The Indonesian government is gradually formalizing industries, passing legislation that protects businesses and consumers and is finally enforcing regulations.
What you hear many expats say is that Indonesia is becoming more and more like a “normal country”. What this really means is the government is getting smarter and making tax avoidance more difficult for both Indonesian nationals and foreign residents.
For some people though this evolution isn’t something they want to understand and/or believe.
As a real estate agent in Indonesia we often get both nationals and foreigners asking to find them a cheap villa that they can rent out yearly and then these new tenants use the villa to sub-rent out to holiday-makers.
But what these individuals don’t consider is the way the country is becoming more “formalized” so trying to make a quick buck without following the regulations is becoming much more difficult.
In the world of real estate in Indonesia this boils down to two main aspects:
1. Villas in a “tourism zone” with the right permits to operate as a holiday rental business will (most of the time) charge a yearly rental fee that does not make it attractive to sub-rent it out to holiday makers. It’s basically too expensive.
2. And the cheap yearly rentals villas will (most of the time) find themselves in a “residential zone” and therefore they won’t have the permits necessary to legally sub-rent out for the holiday rental market.
Once we clarify these points to those who send us these enquiries we typically receive a comment along the lines of “but oh my friend was doing this some years back and didn’t have any issues of renting a villa in a residential zone that didn’t have permits.”
But this is where things have changed.
Back in the day it’s true to say that “yes” the government didn’t have the same resources as it does now to implement its regulations, but now things have moved along and the government in Bali is very serious about collecting its taxes from tourism related activities.
What that means is that it won’t take long for the authorities to find you if you’re renting out a villa to holiday-makers without the correct legal permits.
How you may ask?
It’s really quite simple because all the authorities need to do is to go online and check on the numerous holiday rental villa websites and cross-check to see if these villas actually have the right permits and if they are paying tax.
We always inform our client that it’s not worth taking these risks. The trouble you might find yourself in is often much bigger then any potential monetary gains.
The villa rental market in Bali is definitely a smart place to invest, but we at Seven Stones know for a fact that trying to do rental flips without the right paperwork in place will bring you more headaches than it’s worth.