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Entrepreneurs have noted Bali’s economic growth and industry potential, leading the Indonesian government to simplify business establishment. This ease of obtaining business permits has attracted more business owners and investors to Bali, enhancing its reputation as a prime global business destination.

Opening a business in Bali is an exciting venture, but it requires careful planning and cultural awareness. By understanding the local business landscape, choosing the right structure, and being prepared for potential challenges, entrepreneurs can navigate the intricate path of establishing a successful business.

Building a successful business in Bali goes beyond legalities and financial considerations. Understanding and respecting Balinese culture is integral to fostering positive relationships with the local community.

By working with us, we connect you with the best business consultancies who offer expert guidance on business setup, acquisitions, investments, accounting, payroll, HR, tax matters, licensing, and more. Furthermore, our recommended law firm provides comprehensive legal assistance, including setting up PT PMA, real estate law, immigration law, family law, contractual law, labour law, and other legal services.

Understanding the Local Landscape

Before diving into the intricate process of starting a business in Bali, it’s crucial to comprehend the local business landscape. Familiarise yourself with Indonesian regulations, particularly those related to foreign investment.

Consulting with a local business advisor can provide invaluable insights into legal requirements, permits, and licensing, helping you establish a solid foundation for your venture.

Capital requirements

Paid-In Capital can be foreign or local with a minimum shareholder participation of at least IDR 10M.

The minimum requested capital for a PT PMA is IDR 10 billion, according to BKPM regulation, to be paid within 1 year following the date of incorporation.

If the Paid-In Capital is not paid within 12 months of the company’s establishment, an extension of up to 2 years can be requested, which is a common practice. This requirement, known as a “voluntary rule,” is mandated by Indonesian law, but there is no penalty or fine for non-compliance.

Choosing the Right Business Structure

In order to establish a company in Indonesia, you must meet certain requirements and capital investment. Selecting the appropriate business structure is a pivotal decision that can impact your operations and liabilities.

All foreign companies in Indonesia are PT PMAs (Perseroan Terbatas Penanaman Modal Asing), a limited liability company with foreign direct investment. A company is classified as a PT PMA as long as it has any shares held by a foreign national or a foreign company, regardless of the percentage—whether it’s 100%, 51%, or even 1%. The presence of foreign shareholders classifies the company as foreign-owned.

However, if the intention is solely to act as a representative of an overseas company in Indonesia without generating income from local activities, an alternative option is to establish a representative office.

Each structure comes with its own set of regulations and tax implications, so it’s essential to choose wisely. Engaging legal counsel with experience in Indonesian business law can help you navigate these complexities and ensure compliance.

Company structure

In order to establish the PT PMA (foreign-owned company), the following must be in place before the registration process can begin:

Shareholders – Minimum two people or legal entities (100% owned subsidiary is not possible). If the shareholders can also be legal entities, then the director and commissioner must be physical persons.

Director – Have at least one resident director: this must be a foreigner who applies for a KITAS, or an Indonesian physical person.

Commissioner – does not have to be resident and have a KITAS. It can be a foreigner not living in Indonesia.

Steps to set up a business

There is a lot to cover and understand when you set up a business, so it is best that you go through one of our trusted business and legal experts. 

Establishing a PT PMA in Bali typically costs around IDR 25 million to IDR 40 million. 

The setup and registration typically only take a few weeks at the most and the steps below are required.

  1. Company Name Approval: Select a unique company name that complies with regulatory requirements.
  2. Deed of Incorporation: Prepare this official document, including the Article of Association, and obtain approval from a public notary (like the company’s birth certificate).
  3. Legal Entity Approval: The Ministry of Law and Human Rights must endorse your business as a legitimate entity, a process that follows notarisation and is comparable to obtaining an official stamp. 
  4. Tax Formalities: Register for a Tax ID (NPWP) and secure a Taxable Entrepreneur Confirmation (PKP) from the tax office. These serve as your business’s equivalent of a Social Security Number and are crucial for tasks such as opening a bank account, managing taxes, and obtaining a business licences. 
  5. Domicile Letter Acquisition: Obtain a letter from the local district indicating your business location, akin to a proof of business address. 
  6. Company Registration Certificate (TDP): This certificate acts as official confirmation of your company’s establishment, comparable to a medal of recognition. 
  7. NIB Application: Following registration, your company will be issued the NIB (Business Identification Number), along with a Business License and Location Permit.
  8. Additional Business Licences: Depending on your business activities, you may need to apply for additional Indonesian business licences to ensure full operational compliance.
  9. Open a local business account.

Company tax

The general corporate tax rate is 22%

For companies with a turnover of less than IDR 4.8 billion, a reduced Corporate Income Tax rate of 0.5% on turnover applies for the first three years of operation.

After this period, these companies are subject to an 11% tax rate on profit if their turnover remains below IDR 4.8 billion, or the standard 22% rate if their turnover exceeds this threshold.

Associated business costs

Depending on your business’s nature, you’ll encounter different initial and ongoing expenses to maintain compliance.

For instance, if your business doesn’t necessitate a commerical office space address, you may need to rent a virtual office. A virtual office cost can be up to 8 million per year.

Upon receiving all of your business registration documents, you may wish to translate it to English.

Additionally, taxation reporting intervals—monthly, quarterly, or annually—impose fixed costs for an accountant to engage with monthly and submit reports to the government.

Apart from accounting, there may be legal and payroll support that is required each month depending on the number of employees.

Employing staff

A PMA Company must apply for an Expatriate Manpower Utilization Plan and follow procedures to obtain work and stay permits (IMTA) to employ expats.

Not all positions are open to foreigners.

The minimum monthly wage in Bali is IDR 2.8million – 3.3million (full-time) per month for Indonesian workers, depending on the regency, and IDR 8million for foreign workers.

Business owning property

Investing in property through a PT PMA in Bali is the most popular option for investment in Indonesia, as the PT PMA offers the opportunity to invest foreign capital and own not only leasehold property but also freehold.

Only a PTM PMA can purchase a Hak Milik land title (right to own), also known as the freehold title, which is the most powerful land title in Bali. It gives complete control over land or property, and the owner can utilise the land according to his will. This title can be purchased from Indonesian nationals.

Opening a restaurant business

Has opening a restaurant, cafe or bar in Bali been a dream of yours?

If opening a café or restaurant has been a dream of yours but the upfront investment and commitment seems too expensive back in your home country – high rent charges, payroll and competing with global restaurant and coffee chains – Bali could be the place to bring your independent restaurant vision to life.

It may surprise you, but a lot of people who open a restaurant in Bali do not come from a food and beverage (F&B) background. Instead, they are investors and see the potential for a high return on investment (ROI) that a restaurant business in Bali can produce.

Opening a business in a new country can be a minefield, so it is strongly advised to team up a local based hospitality advisor experienced in Bali’s hospitality climate, who can guide you with Bali specific market trends, legal and due diligence procedures, suppliers and recruitment and contracts in Bali. Indonesia regularly changes laws and operating a new business or industry, as a foreigner with a completely different culture and language can be very difficult, without the right experience and guidance.

Click here for our step-by-step guide on what you need to know about opening a restaurant in Bali safely.