There are several legal structure options to choose from when setting up a rental business in Indonesia, such as Real Estate, Villa Rental, and Home-stay Rental. The right legal structure protects investments and investors from penalty or punishment.
Apart from providing business consultation services, MAM Corporate Solutions assists businesses with various business licenses and compliance. If you wish to import other products into Indonesia or establish company in Indonesia, you can read the following useful articles.
The followings are a number of things that can help decide which legal structure to go with:
Long-term rental business in residential zoning means Real Estate, while short-term rental business in tourism zoning can be either Villa Rental or Home-stay Rental. To be noted here are that Real Estate is specifically for long-term rental and Villa Rental or Home-stay Rental are specifically for tourism zoning.
Villa Rental company can only manage one single villa property. Subsequent property must be registered as a branch or a new company. On the other hand, Home-stay Rental company, also classified as Hospitality Management Consultation, is allowed to manage multiple smaller properties. However, it requires locals as landlords, from whom leases are acquired. Each property is called a Home-stay. The Hospitality Management Consultation company applies for a license for each of the property under the local landlord’s name.
A land larger than 1000 m² with multiple buildings up to 25 rooms, means Villa Rental. A land smaller than 1000 m² means Home-stay Rental. Home-stay Rental company can be registered as a virtual office and KITAS application can be submitted beforehand. Licensing and registration process are relatively faster because home-stay licenses can be applied simultaneously with the company registration and KITAS application.
If after going through the above considerations, you are still left with choices, Villa Rental is the safer bet because you are not conducting business under locals’ names. However, this means you need to apply for your own Building Construction License (IMB), which may take up to 1 year. Only after you obtain an IMB, you can register you company and apply for KITAS. You also need a physical address and register it on the property’s address. As mentioned, you need to register a branch or a new company for subsequent property, which means more work to do. You may find a property that already has an IMB to speed things up a little.
Building Construction License (IMB)
IMB is very important to have as an absent of one is a serious law infringement and punishable with serious fines, up to IDR 2 billion, and/or imprisonment. Before deciding on building a new property, a research on the land is highly necessary. Local authorities will survey the property and compare the final design with the initial architectural plan. This survey is a subjective matter, and hence, the license process may take up to 1 year, depending on the authorities. Also, IMB is only attached to one property and cannot be carried forward to subsequent properties.
The thought of having a passive income from accommodation business may sound so interesting that some people decided to start renting out rooms without proper licenses. These people have been targets for the Immigration Department. Increasing number of offenders are foreigners operating Airbnb rentals illegally. Immigration Department can also target foreigners who manage several home-stays without properly registering as Hospitality Management Consultation.
The enforcement activity has been expanding. The punishment may include heavy fines, imprisonment, or even deportation.
How MAM Corporate Solutions can help?
Setting up an accommodation business may take a lot of time and work. MAM Corporate Solutions can help you with building permit, land due diligence, business licensing, and compliance.
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