Owning a Commercial Villa in Bali

Before we dive into the licensing requirements of setting up a commercial villa in Bali, let’s first clear up the common misconception on what a villa is in legal terms.

Legal Definition of a Villa

As a prime tourist destination, villas are located all over Bali, and a villa is generally pictured as a luxury detached house with a garden and swimming pool, and can be either private residences or commercial properties.

Legally, a villa is classified as a short term rental accommodation, with over 10 free standing bungalows, with amenities such as an in-house restaurant and pool.

A Pondok Wisata is a guest house with less than 5 bedrooms, that can only be owned by a sole Indonesian proprietor.

Owning a commercial Villa in Bali

Foreigners can own a commercial villa in Bali, through purchasing a plot of land through a Right-to-use Title (HGB) or through a leasehold. The villa should naturally be zoned within a tourism area, and the villa should have a building permit purposed for commercial use.

Once the land usage rights and building codes are met, the Villa can be owned through a legal entity vehicle such as a limited liability company. A commercial villa business is open to 100% foreign ownership.

Other factors are to be considered before starting this business such as regional regulations, land size requirement, unit’s size, etc.

A Pondok Wisata cannot be owned legally by a foreigner or a foreign owned entity such as a PMA. Therefore, some foreigners opt for a partnership with an Indonesian partner or a nominee, and accept the risks and legal implications that may occur at a later time.

A commercial villa or Pondok Wisata with operational licenses can be used for conducting daily accommodation rentals. Private residences are unable to be used for commercial rental purposes.

The various types of accommodation rental classifications

Indonesian Business Classification called KBLI classify accommodation rental business into:

• Starred hotel;
• Non-starred hotel;
• Villa;
• Pondok Wisata;
• Apartment hotel;
• Youth hostel;
• Campground;
• Caravan;
• Senior Living; and
• Other tourism accommodations.

The term Villa commonly refers to a “Pondok Wisata” or home stay”. While the Indonesian regulation (KBLI) distinguish between Villa and Pondok (home stay).

Owning a private “Villa” as a residence

Foreigners with any form of KITAS are allowed to own Leasehold or a Right to Use title, that allows ownership of a property for non-commercial usage.

Interested in setting up an accommodation business in Bali? You may find this next article helpful.