Can a foreigner rent out property in Bali? It depends on the right, not the villa

Two buyers look at the same villa, both planning to let it when they are not there. One ends up holding a right built for a home. The other ends up owning a company built for a business. The listing never told either of them there was a difference.

What people ask, and which right actually decides the answer

Every version of this question has the same shape: the answer is set by the right on the certificate, and the villa is incidental. Read across to the right-hand column for the article.

Ten versions of one question. The middle column is doing all the work — which is why it is worth establishing which right you are actually being offered before asking anything about rental income.

The limit that is written into a foreigner’s home

Article 72 of PP 18/2021 is short and almost never quoted in English. It says a foreigner’s ownership of a home is granted with limits, and lists four:

Kepemilikan rumah tempat tinggal atau hunian Orang Asing … diberikan dengan batasan: a. minimal harga; b. luas bidang Tanah; c. jumlah bidang Tanah atau unit Satuan Rumah Susun; dan d. peruntukan untuk rumah tinggal atau hunian.

A foreigner’s ownership of a home or dwelling … is granted with limits: a. a minimum price; b. the land area; c. the number of land parcels or strata units; and d. designation for use as a home or dwelling.

PP 18/2021 art. 72

Three of the four are familiar to anyone who has read the rest of this site: the minimum price whose figure we could not source, the 2,000 m² cap, and the one-parcel rule. The fourth is the one that answers the rental question, and it is the one nobody mentions.

What the fourth limit does say

It makes residential designation a condition of the ownership itself. A foreigner’s hak pakai home is not a general-purpose land right that happens to have a house on it; it is a right granted for a home.

What it does not say

It does not, in the text we read, address an owner who lets their own home while they are away. There is no clause saying “shall not be let”, and we are not going to supply one. Pages that tell you renting out a hak pakai villa is flatly illegal are asserting more than article 72 says; pages that tell you it is fine are ignoring the designation entirely. The accurate position sits between them and is fact-specific.

Running accommodation is a licensed business, and a license needs a business actor

PP 5/2021 is the national regulation on risk-based business licensing. Article 140 lists the thirteen activities of the tourism sector, and the sixth of them, at 140(f), is penyedia akomodasi — providing accommodation.

Two definitions in article 1 then do the rest. A business license, Perizinan Berusaha, is the legality given to a business actor to start and run a business (art. 1(1)). An NIB, Nomor Induk Berusaha, is proof of registration as a business actor (art. 1(12)). Both are framed around the business actor, not the property.

What we could not read, and therefore do not publish

Article 141(1) sends the detail to Lampiran I of the same regulation: the KBLI code, the scope, the risk parameters, the risk level, the license type, its term and the issuing authority, for each of the thirteen activities. The lampiran is not in the text we extracted.

So this page does not tell you the KBLI code for a villa, whether it is low, medium or high risk, or whether it needs an NIB alone or an NIB plus a standards certificate. Every one of those is a real, checkable fact and each has a primary source; we have simply not read it, and a figure here without the instrument behind it would be the thing this site exists not to publish.

Who can be the business actor: the article that settles it

If running accommodation needs a licensed business actor, the next question is who may be one. Perka BKPM 4/2021 article 9 answers it in two sub-articles that are worth reading together.

Article 9(7): investment by an individual is classed as domestic investment — PMDN. Article 9(9): foreign investment — PMA — must take the form of an Indonesian limited liability company, domiciled in Indonesia, unless a law provides otherwise.

Put those next to each other and the individual-foreigner route closes. There is no category in the article for a foreign individual investing in their own name. Foreign-invested business in Indonesia runs through an Indonesian PT.

And a PT PMA can hold the land

PP 18/2021 art. 34 grants HGB to Indonesian citizens and Indonesian legal entities. A PT PMA is an Indonesian legal entity, so it can hold HGB where a foreign individual cannot. That is the whole reason the PT PMA route exists, and the reason it is the one that fits a rental business: the entity that holds the land and the entity that holds the license are the same entity. What running that company involves.

What it costs to be that business actor

A PT PMA carries the investment floor at Perka BKPM 4/2021 art. 12(2) — more than IDR 10 billion, measured excluding land and buildings in the general case, with the property carve-out at article 12(3)(e) that measures it including them for a whole building or integrated complex. A single villa is a small asset to sit under that floor, and the arithmetic of that is a question to put to an Indonesian corporate adviser before choosing the route, not after.

The three structures side by side, for this one question

Stripped of everything except the rental question, the three routes a foreigner has look like this.

The row to read first is “designed for”. Everything else in the table follows from it. The full comparison of the three routes covers the axes this table leaves out — term, inheritance and exit.

The arrangement that makes it worse, not better

A common proposal for foreign buyers who want rental income is a nominee: an Indonesian individual holds the freehold and runs the letting, and the foreigner takes the income through side agreements. It is presented as the practical answer to exactly the problem on this page.

It is not a structure. UUPA (Law 5/1960) art. 26(2) makes any act intended directly or indirectly to transfer freehold to a foreigner void by operation of law, and adds that payments already made cannot be reclaimed. A rental income stream built on a void transfer inherits that. The full text, in the original.

And the lawful version, which is not the same thing

Where the land genuinely belongs to an Indonesian spouse — held under PP 18/2021 art. 70 with a notarial separation of assets — your spouse holds it as a citizen, in their own right. Whether they let it is their decision under the same licensing regime as anyone else. That is lawful precisely because the right is genuinely theirs.

What to settle before you buy, if letting is part of the plan

1. Decide whether this is a home you sometimes let, or a rental business. The answer picks the structure, and it is far cheaper to pick it before the deed than to convert afterwards.
2. If it is a business, price the PT PMA properly — the investment floor, the carve-out that applies to your plan, and the ongoing obligations — before you price the villa.
3. Get the KBLI code, risk level and license type in writing from an Indonesian adviser, citing Lampiran I of PP 5/2021. It is a documentary answer.
4. If it is a lease, read the use clause before anything else. A lease that restricts use is a lease you cannot let commercially however it is licensed.
5. Treat projected rental income as a separate question. Management fees, platform commissions and occupancy are a different subject with a different site — see below.

We are paid a fixed fee per enquiry, agreed in advance, and it does not move with the structure you choose or with whether you buy. That is why this page can say plainly that the cheapest route for a rental investor is often the one that does not fit the plan.

Already own and the question is who runs the letting and what they charge? That is management rather than ownership, and a different site: balivillacare.com. Nothing on this page addresses management arrangements.

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