What costs and taxes should you keep in mind when investing in real estate in Bali?

When investing in real estate in Bali, it's important to have a clear understanding of the various costs and taxes you will encounter. Having a clear picture of these financial obligations helps you create a realistic budget and avoid surprises. Below is an overview of the main costs and taxes you can expect:

1. Purchase Costs

• Notary Fees: When purchasing real estate, it is mandatory to finalize the transaction through a notary. Notary fees range from 0.5% to 1% of the purchase price, typically around 1%.
• transfer_tax/" title="Transfer Tax">Transfer Tax: This tax can vary, but you should expect around 5% of the purchase price.
• Broker Fees: Brokers in Bali typically charge a commission of 5% of the sale price for their services.
• Legal Fees: The cost of a local lawyer averages €2000 per purchase, which often includes company establishment and the application for a KITAS (work and residence permit).

2. Permits

• Building Permits: For construction projects, you will need a PBG permit, which must be applied for before construction can begin. The cost of these permits can vary depending on the project.
• Annual Property Tax (PBB): This tax is 0.5% of the value of the property and must be paid annually.

3. Taxes

• VAT (Value Added Tax): If you rent commercial property, you must pay 10% VAT on the generated income. This tax must be submitted monthly to the tax office.
• Corporate Tax: The standard corporate tax rate is 12% of the net profit. For new businesses, there is a favorable scheme: in the first three years, you only pay 0.5% tax on the turnover.
• Dividend Tax: When you distribute profits as dividends, you pay between 10% and 13% tax. However, if you reinvest the profits in Indonesia within three years, you can benefit from 0% dividend tax.

4. Operational Costs

• Maintenance Costs: Expect annual maintenance costs for your property, including repairs and possible improvements.
• Staff Costs: If you hire staff for the operational activities of your property, such as a cleaning team or a manager, you should include these costs in your budget as well.
• Insurance: It’s advisable to insure your property against damage and liability, which also incurs additional costs.

Maintaining real estate in Bali requires regular upkeep to ensure the value and appeal of the investment. Minor maintenance, such as painting and repairs, should be done annually, with costs around €1,000 per villa per year. Major maintenance is recommended every 5 to 10 years, with estimated costs ranging from €2,000 to €3,000 per year. Regular maintenance prevents high repair costs and ensures the villa remains attractive to tenants.

Conclusion

Regular minor and major maintenance is essential to preserve rental value and reduce long-term costs.

Investing in real estate in Bali offers attractive opportunities, but it’s crucial to consider the various costs and taxes involved in both the purchase and management. By being well-informed about these financial obligations, you can develop a solid investment strategy and optimize your return. Make sure you have a detailed financial plan that takes all these costs into account, so you can successfully invest in Bali’s flourishing real estate market.