Tax Benefits for Real Estate Investors in Bali

Published on October 3, 2025 and written by Cyril Jarnias

Bali, the paradise island of the Indonesian archipelago, attracts millions of tourists each year with its pristine sandy beaches, rich culture, and relaxed atmosphere. But beyond its tourist appeal, Bali is also emerging as a prime destination for international real estate investors. With a dynamic property market and attractive tax benefits, the Island of the Gods offers unique opportunities to diversify investment portfolios and generate appealing rental income.

In this article, we will explore in detail the tax benefits available to real estate investors in Bali. We will examine local taxation, international double taxation agreements, as well as applicable property and housing taxes. We will also compare Bali’s tax situation with other popular investor destinations to help you make an informed decision.

A Local Tax System Favorable to Foreign Investors

The Indonesian government has implemented several incentive measures to attract foreign investors to the real estate sector, particularly in Bali. These tax benefits make property investment on the island especially attractive.

Reduced Tax Rate on Rental Income

One of the main advantages for real estate investors in Bali is the reduced tax rate on rental income. Indeed, income generated from property rentals is subject to a flat rate of only 10%. This rate is significantly lower than that applied in many other countries, where rental income can be taxed up to 45% in the highest brackets.

This advantageous tax system allows investors to retain a larger portion of their rental income, thereby increasing their investment profitability. Additionally, this flat rate greatly simplifies administrative procedures, as there’s no need to declare all income to benefit from this favorable tax regime.

Exemption from Capital Gains Tax

Another major advantage for real estate investors in Bali is the exemption from capital gains tax after a 5-year holding period. This measure encourages investors to maintain their properties long-term while offering the possibility of realizing significant capital gains without tax penalties.

This exemption is particularly interesting in the context of Bali’s property market, which has experienced sustained growth over several years. According to data from Bali Luxury Estate, property prices in Bali have increased by an average of 10-15% annually over the past five years. This trend suggests excellent capital gains opportunities for patient investors.

International Agreements to Avoid Double Taxation

For foreign investors, the issue of double taxation is often a major concern. Fortunately, Indonesia has concluded double taxation avoidance agreements with many countries, providing additional tax security for real estate investors in Bali.

An Extensive Network of Tax Treaties

Indonesia has signed tax treaties with more than 60 countries, including France, the United States, the United Kingdom, Germany, and many other European and Asian countries. These agreements aim to prevent income generated in Bali from being taxed both in Indonesia and in the investor’s country of residence.

For French investors, for example, the Franco-Indonesian tax treaty stipulates that real estate income is taxable in the country where the property is located, in this case Indonesia. This income is then exempt from tax in France, subject to consideration of the effective rate. This provision effectively avoids double taxation while preserving tax progressivity in the country of residence.

Simplified Procedure to Benefit from Treaty Advantages

To benefit from the advantages provided by tax treaties, investors generally need to follow a specific procedure. In Indonesia’s case, this procedure has been simplified to facilitate foreign investors’ processes.

Simply complete a specific form (DGT-1 for individuals or DGT-2 for legal entities) and have it validated by the tax authorities of your country of residence. This document then allows automatic benefit from the reduced rates or exemptions provided by the applicable tax treaty.

This administrative simplification represents significant time and cost savings for investors, who can then focus on managing their investment rather than complex tax procedures.

Property and Housing Taxes Among the Lowest in the World

In addition to tax benefits on rental income and capital gains, real estate investors in Bali also benefit from particularly advantageous property and housing taxes. These reduced charges contribute to increasing overall investment profitability.

Minimal Property Tax

Property tax in Indonesia, called “Pajak Bumi dan Bangunan” (PBB), is calculated based on the property’s tax value, which is generally well below its market value. The tax rate varies between 0.1% and 0.3% of this tax value, which is extremely low compared to many other countries.

For example, for a villa with a market value of €500,000, the annual property tax could amount to only €500 to €1,500 per year. This reduced charge allows investors to maximize their rental income and improve overall investment profitability.

No Residence Tax for Property Owners

Unlike many countries where residence tax can represent a significant expense, Indonesia does not apply residence tax to owner-occupiers or landlords. This absence of additional tax helps reduce property holding costs in Bali.

For investors who choose to rent their property, this absence of residence tax translates to reduced expenses, allowing for more competitive rental prices while maintaining good profitability.

Moderate Notary and Registration Fees

When acquiring property in Bali, notary and registration fees are also relatively moderate compared to other destinations. These fees typically amount to approximately 2.5% to 3% of the purchase price, which is significantly lower than fees in many European countries, where they can reach 7% to 10% of the acquisition price.

This moderation in acquisition costs allows investors to reduce the overall cost of their investment and reach profitability threshold more quickly.

Bali vs Other Destinations: An Undeniable Tax Advantage

To better understand Bali’s tax attractiveness for real estate investors, it’s interesting to compare its situation with other destinations popular among international investors.

Bali vs France: A Considerable Tax Gap

Compared to France, Bali offers significantly superior tax benefits for real estate investors. In France, rental income is subject to the progressive income tax scale, which can reach 45% for the highest brackets, plus 17.2% in social charges. Additionally, property tax and residence tax can represent significant expenses, sometimes exceeding 1% of the property value annually.

In Bali, with a flat 10% tax rate on rental income, minimal property tax, and no residence tax, investors can expect significantly higher net profitability.

Bali vs Thailand: Comparable Benefits but a More Dynamic Market

Thailand, another popular destination for real estate investors in Southeast Asia, also offers interesting tax benefits. The tax rate on rental income there is progressive, ranging from 5% to 35%, but with relatively advantageous brackets. Property tax is also low, varying from 0.02% to 0.5% of the estimated property value.

However, Bali stands out with its more dynamic property market, with more sustained price growth (10-15% annually compared to 5-8% in Thailand) and stronger rental demand, particularly due to its superior tourist appeal.

Bali vs Portugal: Similar Tax Benefits but Lower Entry Cost

Portugal has become a highly sought-after destination for real estate investors in recent years, particularly due to its advantageous tax regime for non-habitual residents. This regime offers tax exemption on foreign-source income for 10 years, including rental income.

Although this regime is very attractive, it requires becoming a tax resident in Portugal, which is not necessary to benefit from tax advantages in Bali. Additionally, the entry cost to Bali’s property market is generally lower than in Portugal, particularly in the most sought-after areas like Lisbon or the Algarve.

Conclusion: Bali, A Tax Haven for Savvy Real Estate Investors

The island of Bali positions itself as a premier destination for real estate investors seeking significant tax advantages. With its reduced tax rate on rental income, capital gains tax exemption after 5 years of ownership, property taxes among the lowest in the world, and absence of residence tax, Bali offers a particularly favorable tax framework for property investment.

These tax benefits, combined with a dynamic and constantly growing property market, make Bali an essential destination for investors looking to diversify their portfolios and generate attractive rental income. The simplicity of administrative procedures and the existence of numerous double taxation avoidance agreements further enhance the appeal of this paradise destination.

However, as with any foreign investment, it’s crucial to thoroughly research local market specifics, current regulations, and potential risks before getting started. Guidance from experienced professionals can prove invaluable for navigating the subtleties of Bali’s property market and fully leveraging the available tax benefits.