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A Taxing Change Ahead for Commercial Villas?

Government Determined to Collect Taxes from Bali's Illegal Villa Sector.

(5/14/2007) According to the Indonesian-language Bali Post, Bali's Governor has issued a circular memo (No. 556.2/1590/I/Dispara) addressing steps to give a clearer legal and business standing to the hundreds of villas operating commercially in Bali.

According to the Bali Post, one of the clauses in the subject memorandum calls for commercial villas to be classified as "non-star hotels" and begin paying taxes on levels equivalent to local hotels. Currently, all guests staying at star-rated hotels have a 21% tax and service charge added to their bill for accommodation and other services purchased during the course of their stay.

A recent survey carried out by the Government showed that there are some 649 villas now formally recorded as operating in the Badung Regency of Bali, of which only 213 (32.8%) have operating permits and valid tax numbers.

If the Governor's circular memo is realized, the additional tax revenue for local government would be substantial.

Separately, local Government Zoning officials have pointed out to the Government that many of the so-called "illegal villas" have been found to not only be lacking valid operating permits, but have also been built without the required building permits, with some on lands on which the villas stand not zoned for commercial residential development.

The officials have asked if the effort to bring the illegal villas into conformance with the law will require a strict interpretation of the law and the demolition of the illegally constructed villas.