Pondok Wisata License and Other Legal Requirement to Rent Out your Property in Bali

You have finally purchased the holiday home of your dreams on the beautiful island of Bali where you will spend a few months a year. For the remaining months,  you might like to rent it out and earn some return on your investment, or you could even rent out a room whilst you are staying there.  Before you jump into the rental business, it is worthwhile understanding some of the legal requirements so that you don’t fall foul of Indonesian law.

And the first step to renting your home in Bali is to get the PONDOK WISATA or HOMESTAY OPERATIONAL LICENSE. This is something like a Building Permit for Commercial Use required in Bali to operate residential properties as vacation rentals. This licence covers up to 3 Units (for older licenses) or up to 5 bedrooms (for newer licenses). For anything bigger than that it would require a full hotel license.

For an Indonesian; a guesthouse license can be obtained without setting up a business.
For a foreigner; he/she must set up a business (PMA) in order to request a guesthouse license. To avoid this the foreigner can get the guesthouse license by making an agreement with and Indonesian person (Nominee person) whose name will be used to get the Pondok Wisata License.

MORE ON THE PONDOK WISATA LICENSE AND OTHER LEGAL REQUIREMENTS:

For Small Accommodation:  For 1 to 5 rooms or villas If you have just one villa unit or apartment or up to 5 rooms in the one house, they all have the same registration requirements in Indonesia. A Pondok Wisata is a license to rent out a small property or homestay. It is issued to the owner of the property and is only available to Indonesian citizens. If you have purchased your land rights with an Indonesian partner, it is their name that must go on the Pondok Wisata.

If your property has been purchased as a Penaman Model Asing (PMA) Company it is not technically eligible for a Pondok Wisata, as it is not an Indonesian citizen. The rules regarding this can differ between regions, so it is therefore worthwhile checking into this before setting up your ownership structure. When you apply for your Pondok Wisata, you will also need to lodge an IMB (Ijin Mendirikan Bangunan) with your application.

An IMB is essentially the building permit that also serves as a registration document for the building, it specifies what the building can be used for. The IMB must state that the building is a commercial one and your property must be in the correct zoning (such as “tourist zoning”). An IMB can take more than 3 months to obtain and costs approximately Rp5million.  It can then take at least another 2 months to obtain the Pondok Wisata licence which costs from Rp1million to over Rp20million depending upon the type of licence (for example a homestay is much cheaper to register than a commercial villa).

The Pondok Wisata licence will be issued with a duration of 5 years, after which it will need to be extended. Taxes will also need to be filed for the property but this may vary between being monthly or annually, dependent upon the requirements of the local tax authorities in your village. If the property does not generate any income it will still need to file the appropriate taxation documents.

Getting legal documents done can take both time and effort in Indonesia. As always we recommend that you seek advice or assistance locally to ensure that all the registrations have been done correctly, and perhaps to also provide some inside knowledge into how to get them done quickly.

For Larger Properties of Greater than 5 rooms If your property has more than 5 rooms available for rent, or you have more than 5 villas or apartments available, you will require a Melati Hotel license. This license is also generally only issued to Indonesian citizens so you will need to consider your ownership structure before entering into this arrangement.

As this is a much larger business venture then simply renting out one villa or apartment, there are many more legal restrictions around obtaining a Melati Hotel license.  It is therefore best to obtain some local legal advice before commencing your application.

For Purchasing an Existing Rental Property If you intend to purchase a property that is already operating as a rental property for tourists, you should also check that the property has obtained all the necessary licenses as part of your due diligence. Unfortunately some properties have not obtained all the necessary permits, so it is best to insist on seeing them before you sign on the dotted line.

Registration of Foreigners Once you have obtained your licence and are receiving your first guests you will need to ensure that they are appropriately registered. If you rent to foreign nationals, you will be responsible for ensuring that they are reported to the police to obtain the Surat Tanda Melapor (STM) or Certificate of Police Registration which states how where the foreign national is staying and for how long.  This involves taking a copy of their passport to the police within 24 hours of their arrival.

If an STM is not obtained then you may be fined by the police. If you are not going to be at the property whilst it is being rented, you will need to ensure that you have someone who is able to arrange the STM for you. Whilst it can be challenging to obtain the appropriate licenses to rent our your property, it will be worth it for the rental returns you receive on your investment. The time invested may also increase the value of your property rights, as the license contributes to the property’s overall value as well.

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