It is the dream of many Australians to live in Bali or to go a step further and run a business there too, such as renting out Bali villas to tourists. Whilst both of these ambitions are possible, they are also both subject to Indonesian laws regarding property and business ownership. To this end, if you are thinking about living or running a business in Bali, seeking local legal expertise is a must.
Much of that advice will understandably focus on Indonesian property laws as that is the laws that would be in play if you were considering property ownership in Bali. Let us highlight one huge and obvious hurdle and that is that as it stands, Indonesian law prevents foreigners from owning the freehold on property in Bali. As such, when you see or hear discussions about ‘owning’ Bali villas, there will be several caveats to that.
So, owning the freehold if you are not an Indonesian citizen is not possible under current laws, and so the question is, “What can you do?”. One option some entrepreneurs try is to use a nominee. A nominee is an Indonesian citizen into whose name the title for the freehold of the property is given. This is a highly risky procedure and there have been some investors who have seen that investment disappear either through nefarious activity by the nominee or a legal wrangle.
That being said, the are many investors who use nominees successfully, but any agreement must be created and overseen by a notary. This necessitates that you seek sound and watertight legal advice and proper legal representation to protect your interests.
A second way to ‘own’ a villa to rent it to tourists is to lease one from an Indonesian citizen who owns the property. In effect, the lease agreement gives you a long term ‘ownership’ of the property for periods over 25 years. The landlord owns the property title but to all intents and purposes, the villa is yours which would include being able to rent it out to tourists. You even have the legal right to sell the lease or pass it on to your heirs.
Although less risky than using a nominee, leasing property is not without risk, so again you must seek legal advice and a notary to draw up the lease agreement to protect your interests, and conversely those of the landlord leasing the property to you.
A third option that is noteworthy for those wishing to run a Bali villas business, is to have the property purchased in the name of a company. This is a company in Indonesia that is set up similarly to limited companies in Australia. However, this option allows foreigners to own a company wholly or partly in Indonesia.
The laws which preclude foreign individuals from owning properties in Bali are not applicable when it come sot certain types of business, and thus your Indonesian registered company could be the vehicle by which you can purchase one or more villas for your holiday rental business.
One point we must mention is many entrepreneurs believe that can buy land and build a villa to rent it out to tourists. This is not the case, as this only allows residential builds, not business use properties. Also, multiple restrictions exist that limit what properties can be used for within designated zones.