Indonesia’s Bali Moves to Legalize Illegal Rentals Amid Regulatory Challenges
Bali, Indonesia — The government of Bali is intensifying efforts to bring thousands of unlicensed tourist accommodations into the formal sector, aiming to improve service quality, protect visitors, and create fairer competition within the island’s vital tourism industry. However, accommodation operators have raised concerns over bureaucratic delays that hinder timely compliance with new regulations.
In December 2025, Indonesia’s Ministry of Tourism issued a directive requiring unlicensed accommodation providers—including hotels, guest houses, villas, and homestays—in regions such as Bali, Yogyakarta, West Nusa Tenggara, and West Java to register by March 31, 2026. The registration initiative is intended to close tax gaps created by illegal rentals and to enforce standards aligned with local customs and regulations. Operators failing to register risk delisting from major online travel platforms such as Airbnb and Booking.com.
This move follows calls by Bali’s Governor, I Wayan Koster, who advocated for banning Airbnb on the island, arguing that the platform facilitates untaxed income generation through unlicensed properties. Responding to widespread challenges faced by thousands of unregistered villa owners and other lodging operators, the central government has extended deadlines to ease compliance pressures.
To streamline the process, Bali’s provincial government has launched a Tourism Business Licensing Audit programme. This initiative is designed not only to assist unregistered providers in obtaining the necessary permits but also to ensure that licensed businesses adhere to existing regulations and respect Balinese cultural traditions.
While the initiative aims to formalize Bali’s lucrative accommodation sector and enhance tax collection, local operators report that administrative red tape slows registration processes, posing difficulties for compliance within the set timeframe. The government, however, continues to emphasize the importance of legal registration to sustain Bali’s tourism growth while maintaining regulatory standards.
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