Bali is one of the most popular tourist destinations in the world. Now that the Covid-19 Pandemic has ended, Bali continues to attract a lot of potential investors who are interested in opening new businesses such as restaurants, coffee shops, SPAs, or real estate. When you start a new business in Bali, you might be surprised by the strict laws, taxes and obligations in the hospitality sector when compared to other business lines.
Understanding tax regulations in Bali can be dizzying! Even renting out a Private Villa is a hospitality business, subject to strict regulation. This guide will give you relevant information about hospitality tax rates and tips for handling your business and complying with tax regulations in Bali.
Before you run your business in Bali, you should be familiar with the terms Value Added Tax (VAT) and Hospitality Tax, also referred to as PB1. PB1 is a tax that is imposed on services provided in the hospitality sector, in businesses such as Hotels, Restaurants, and Entertainment.
This tax acts as a substitute for the Value Added Tax (VAT), and both taxes may not be applied at the same time. As such, hospitality services are charged with PB1 and not with VAT.
According to Law (UU) Number 28 of 2009 (Undang-Undang (UU) Nomor 28 Tahun 2009) concerning Regional Taxes and Regional Levies (PDRD), PB1 is collected by the Regional Government, unlike the VAT which is collected by the Central Government. Moreover, they are authorize to set the tax rate in their regions, with the most common rate being 10% of the service.
“Tourism Tax” is included in domestic taxes like accommodation tax and restaurant tax. Services of hospitality businesses are subject to this tax. The tax rate depends on the business’s activities.
| Business | Local Tax Rate |
| Hotel | 10% |
| Restaurant | 10% |
| SPA | 12.5% |
| Massage | 12.5% |
| Discotheque | 12.5% |
| Karaoke | 12.5% |
| GYM | 12.5% |
As shown in the above table, these hospitality taxes should be charged to the customers, and it must be inscribed on the invoice, the rate might be different depends on the regency.
For foreigners, a service charge can be understood as a mandatory tip. This charge is set by the business but cannot be higher than the PB1 and is usually set to 5% of the total service price. This money is then distributed among the staff members at the end of the month. It’s illegal for a business to keep the charge as company income.
The service charge is also known as an additional fee, that is paid by the customer in the hospitality business. The hospitality business type determines the rate of their service charge. The rate must range from 5% to 10% of the customer’s bill before adding local tax.
Companies distribute funds collected from service fees to their employees. Companies should create an internal policy on how to distribute it to employees. The cost of service charge provided to employees is counted as income and is subject to relevant taxes for the respected employee.
In order to calculate PB1, businesses should first add the service charge to the bill. Once the service charge has been applied, the Hospitality Tax can be applied to the whole bill.
Example:
| Total bill before local tax and service charge | IDR 700,000 |
| Service charge (5%) | IDR 35,000 |
| Gross amount | IDR 735,000 |
| Local tax/PB1 (10%) | IDR 73,500 |
| Total | IDR 808,500 |
As mentioned earlier, hospitality businesses must pay domestic taxes. To pay for this, the business must have a domestic tax number (Nomor Pokok Wajib Pajak Daerah – NPWPD). You can get NPWPD during company registration. If your company has several branch locations that are subject to local tax, each location should have its own NPWPD. Payment deadlines for local taxes are also different, it depends on the different regencies where your business is located.
So, if your business has locations in different regencies, the deadline might be different, it leads to the deadline for paying corporate income tax may be different from the domestic tax. It can be hard to manage all these data, but Smart Advisory Solution (SAS) as a leading business and financial firm including tax services can help you to navigate all the process and create the tax report on your behalf.
Tax payment in Bali follows the same rules and regulations as in other places. Hospitality business owners must pay special attention to the deadline for reporting and payment of local taxes because the dates vary depending on the business location. Check the dates below to know when to report and pay your taxes:
| Regency/City | Reporting Deadline | Payment Deadline |
| Denpasar | the 20th of the following month | the 20th of the following month |
| Badung | the 20th of the following month | the 20th of the following month |
| Gianyar | the 15th of the following month | the 15th of the following month |
| Buleleng | the 15th of the following month | the 15th of the following month |
| Klungkung | the 7th of the following month | the 27th of the following month |
| Tabanan | the 10th of the following month | the 20th of the following month |
| Karangasem | the 15th of the following month | the 15th of the following month |
If you have a question or want to open a new business in Bali, as a one-stop solution leading business and finance firm in Indonesia, our expert team of tax and legal consultants will provide you with the assistance and guidance required to navigate these complex issues. Contact us to book a consultation and get started now through our email or WhatsApp.
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