Top 5 Mistakes Foreign Buyers Make When Buying Bali Property

Every year, foreign buyers lose money on Bali property deals that could have been avoided. After helping hundreds of buyers navigate the process, we’ve identified the five most common — and most expensive — mistakes.

Mistake #1: Using Nominee Ownership

This is the single biggest risk foreign buyers take in Bali, and it’s more common than you’d think. Here’s how it works: an agent suggests you buy the property through an Indonesian citizen’s name (the “nominee”), with a side agreement giving you the real ownership.

Why it’s dangerous:

• The nominee legally owns the property — not you
• Side agreements (“nominee agreements”) are not enforceable in Indonesian courts
• If the nominee dies, their heirs inherit — not you
• If the nominee has debts, your property can be seized by creditors
• Indonesian courts have repeatedly ruled against foreign “owners” in nominee disputes

What to do instead: Use a leasehold agreement or PT PMA structure. Both are legal, established pathways that protect your investment.

Mistake #2: Skipping Due Diligence

“The villa looks great, the price is right — let’s sign.” This attitude has cost foreign buyers tens of thousands of dollars.

Bali’s property market is largely informal. There is no Western-style conveyancing system. Properties can have:

• Disputed ownership — multiple people claiming the same land
• Unpaid taxes — creating liens on the property
• Incorrect zoning — the land may not be approved for your intended use
• Missing building permits — structures can be ordered demolished
• Encumbrances — the land may be collateral for someone else’s loan

Professional due diligence costs approximately $630 USD and takes 14 working days. It’s the best investment you’ll make in the entire process.

Our legal partner checks all 8 required documents — see the full checklist.

Mistake #3: Not Understanding Leasehold vs Freehold

Many foreign buyers assume “buying” in Bali means the same as buying property in their home country. It doesn’t.

The reality: Foreigners cannot own freehold land (Hak Milik) in Indonesia. Full stop. If someone tells you otherwise, walk away.

Your options are:

• Leasehold (Hak Sewa): A long-term lease (25-30 years with extensions) signed with the Indonesian landowner. Simple, affordable, and the most common choice.
• PT PMA: A foreign-owned Indonesian company that holds Hak Pakai (Right to Use) title. More expensive to set up but provides registered title at BPN (National Land Agency).

The key difference: leasehold is a contract (not registered at BPN), while PT PMA gives you a registered title. For a single villa purchase for personal use or rental, leasehold is usually sufficient. For multiple properties or business operations, PT PMA is the better choice.

Critical detail: Leasehold values depreciate as years remaining decrease. A villa with 25 years left is worth more than the same villa with 10 years left. Factor this into your investment calculations.

Mistake #4: Ignoring Home-Country Tax Obligations

Buying in Bali doesn’t mean your income disappears from your home country’s tax authority. Most countries require tax residents to declare worldwide income — including rental income from overseas property.

What you must do:

• Declare rental income to your home-country tax authority
• Pay Capital Gains Tax when you sell (rules vary by country)
• Keep records for the required retention period in your jurisdiction

Example — Australian buyers: Australian tax residents must declare Bali rental income to the ATO. The Australia-Indonesia Double Tax Treaty (1992) prevents double taxation — you can claim a Foreign Income Tax Offset (FITO) for Indonesian taxes already paid. FIRB does NOT apply to Australians buying overseas property.

For all nationalities: Indonesia has double tax treaties with over 70 countries. Check whether your country has a treaty with Indonesia to avoid paying tax twice on the same income. Always consult a tax advisor experienced in cross-border property investments.

Get more details in our Tax Guide for Bali Property.

Mistake #5: Not Using a Local Legal Partner

Some buyers try to save money by handling everything themselves, or rely solely on the selling agent’s recommended notary. This is risky because:

• Selling agents work for the seller, not you
• Language barriers can lead to critical misunderstandings in contracts
• Local customs around property transactions differ significantly from Western norms
• Document verification requires knowing what to look for and where to check

A good local legal partner will:

• Conduct independent due diligence at BPN
• Draft or review all agreements in your favour
• Ensure notarisation is done correctly
• Handle tax payments and compliance
• Advise on the best ownership structure for your situation

Our in-house legal team provides comprehensive legal support for foreign buyers — from initial due diligence ($630 USD) through to completion.

The Bottom Line

Buying property in Bali can be an excellent investment — foreign buyers regularly achieve 10-20% annual returns. But the market rewards those who do their homework and penalises those who cut corners.

The three non-negotiables:

1. Never use nominee ownership
2. Always conduct professional due diligence
3. Always use an independent legal partner

Ready to buy the right way? Browse our verified properties — every listing has passed our 8-point document check. Or contact us for a free consultation on your specific situation.