Bali villa rental business – the acute danger to operate unlicensed villa rental in Bali
Now more than ever it is critically important to make sure your villa has the correct paperwork and your paying local taxes if you want to operate a villa rental business in Bali.
Authorities on Bali island are intensifying the search for unlicensed accommodations operating businesses in the regency. This includes hostels, home stays, hotels as well as rented houses and villas according to Bali Tribun (Bali villa rental business).
The main reasons for these recent crackdowns are to ensure operators comply with laws and regulations, which are in place to protect communities and employees working in the hospitality industry, and to clamp down on tax avoidance.
Villas with a maximum of 5-bedrooms located in designated tourism zones can apply for something called a Pondok Wisata license, which allows them to run a tourism-based daily rental business. Those located in residential zones can apply for a Rumah Kos (Guest House) license, which allows for a maximum of 10 rooms available for rent.
In both cases licenses must be under the name of the legal landlord or a company director if the property is owned by a legitimate business entity and a local tax ID has to be registered.
AirDNA, the data and insight window for Airbnb have 28,672 active villa rentals in Bali with an average occupancy of 53%. While the platform does not indicate how many of these have the correct licenses or how many of them are complying with tax regulations, what is clear is that a significant amount of money is exchanging hands.
In November 2017, the UK’s Daily Telegraph reported that Bali is the most lucrative destination for Airbnb operators worldwide where the average revenue per user is USD 44,000. One such operator, apparently managing 504 properties, was raking in over USD 16.5 million a year, they said.
Giri Prasta, Regent of Badung told Bali Tribun (Bali villa rental business) that so far data has been collected and recorded from 62 villages and 554 Banjars in the regency.
Every Balinese village is divided into one or more Banjars, which are cooperative community associations of neighbours, and they are all cooperating with the drive to meet the island’s tax targets. Chairman of Badung Parliament, Putu Parwata also says he is supporting the Regent’s efforts to clamp down on illegal tourist accommodations in Badung say Bali Tribun.
Villas owned by foreigners are under particular scrutiny. Giri said he was aware of many foreign owned villas that were using the names of local “nominees” on land certificates to avoid the restrictions in place on foreigners owning freehold land and property in Indonesia. Doing this is illegal and so is avoiding paying tax.
Technical teams have already been established to check paperwork and compliance and to provide warnings if they find violations. If no action is taken by villa owners to acquire the correct licenses or pay their taxes after three warnings their business will be closed says Giri.
Bali villa rental business – Sources: Bali Tribun, Telegraph UK, AirDNA