How to Create a Company in Bali for Foreigners

Bali, Indonesia, with its picturesque landscapes, vibrant culture, and growing economy, has become an attractive destination for foreigners looking to establish a business. Whether you’re planning to open a restaurant, a villa rental business, or a tech startup, understanding the legal framework and procedural steps is crucial for success. This guide will walk you through the process of creating a company in Bali, focusing on the most common and suitable option for foreigners: the establishment of a PT PMA (Penanaman Modal Asing or Foreign Investment Company).

1. Understanding the Legal Landscape

Before diving into the process, it’s essential to have a basic understanding of the legal landscape for foreign investors in Indonesia:

• Types of Companies Available: In Indonesia, there are various types of business entities, but the most relevant for foreign investors are the PT PMA and Representative Offices. PT PMA allows full foreign ownership in certain business sectors, while a Representative Office is limited to non-commercial activities such as market research.

• Negative Investment List: Indonesia has a Negative Investment List (DNI) that outlines sectors that are closed or limited to foreign investment. It’s crucial to consult this list to ensure that your business idea aligns with the allowed sectors.

• Capital Requirements: A PT PMA has specific capital requirements. The minimum authorized capital is IDR 10 billion (approximately USD 670,000), with IDR 2.5 billion (approximately USD 167,000) to be paid up. However, these amounts may vary depending on the business sector.

2. Pre-Incorporation Steps

Before officially establishing your company, several pre-incorporation steps must be taken:

• Market Research: Conduct thorough market research to understand the local demand, competition, and business environment in Bali. Consider hiring local consultants or experts who can provide insights and assist with cultural nuances.

• Business Plan: Draft a comprehensive business plan outlining your objectives, target market, financial projections, and operational strategies. This plan will not only guide your business but also be required by authorities and potential investors.

• Visa Requirements: As a foreigner, you’ll need to obtain the appropriate visa to live and work in Indonesia. The most common visa for business purposes is the Investor KITAS (Limited Stay Permit). This visa allows you to stay and work in Indonesia, provided you are a shareholder in the company.

3. Incorporating Your PT PMA

Once you’ve completed the pre-incorporation steps, you can move on to the actual incorporation process. Here’s a step-by-step guide:

• Choose a Company Name: The first step is to choose a unique company name. The name must be approved by the Ministry of Law and Human Rights. It’s advisable to select a name that reflects your business activities and is easy to pronounce for both locals and international clients.

• Draft and Legalize the Articles of Association: The Articles of Association (AoA) is the document that outlines the structure, management, and operation of your company. This document must be drafted and legalized by a public notary. The AoA should include details such as the company’s name, address, business activities, shareholding structure, and the roles of directors and commissioners.

• Obtain the Deed of Establishment: After the AoA is finalized, the notary will create the Deed of Establishment. This document officially establishes your PT PMA and must be submitted to the Ministry of Law and Human Rights for approval.

• Capital Injection: You must inject the required paid-up capital into your company’s Indonesian bank account. This step is crucial as the bank will issue a capital injection statement, which is necessary for the next stages of incorporation.

• Obtain Business Identification Number (NIB): The next step is to register your company through the Online Single Submission (OSS) system. The OSS system will generate your Business Identification Number (NIB), which acts as your company’s primary identification and allows you to obtain other licenses.

• Apply for Business Licenses: Depending on your business activities, you may need to apply for specific licenses. Common licenses include the Business License (Izin Usaha) and Commercial or Operational License (Izin Komersial atau Operasional). These licenses are also obtained through the OSS system.

4. Post-Incorporation Steps

After your PT PMA is officially incorporated, there are several post-incorporation steps you must take to ensure your business operates smoothly:

• Tax Registration: Register your company with the Indonesian Tax Office to obtain a Tax Identification Number (NPWP). You’ll also need to register for VAT (Value Added Tax) if your business meets the required threshold.

• Hiring Employees: If you plan to hire local employees, you’ll need to comply with Indonesia’s labor laws, including providing employment contracts, paying the minimum wage, and contributing to social security programs (BPJS).

• Opening a Corporate Bank Account: Open a corporate bank account in an Indonesian bank to manage your company’s finances. Ensure that the account is in the name of the PT PMA and that you provide all required documentation.

• Office Lease or Purchase: Secure an office space in Bali, whether by leasing or purchasing property. If you plan to operate a physical business (e.g., a restaurant or retail store), ensure the location complies with zoning regulations and that you have the necessary permits.

5. Navigating Challenges and Opportunities

While establishing a company in Bali can be rewarding, it’s essential to be aware of the potential challenges and opportunities:

• Cultural Differences: Bali has a unique culture, and understanding local customs and traditions is crucial for business success. Building strong relationships with local partners and employees can help you navigate cultural differences.

• Bureaucracy: Indonesia’s bureaucracy can be complex, and the incorporation process may take time. Patience and persistence are key, and it may be beneficial to work with local consultants who are familiar with the system.

• Tourism Opportunities: Bali is a major tourist destination, offering opportunities in hospitality, retail, and services. However, competition can be fierce, so differentiating your business and offering high-quality products or services is vital.

• Sustainability: Bali is increasingly focusing on sustainability, and businesses that adopt eco-friendly practices may find favor with both the local government and customers. Consider incorporating sustainability into your business model, such as reducing plastic use, supporting local artisans, or using renewable energy.

6. Conclusion

Creating a company in Bali as a foreigner involves navigating a complex legal landscape, understanding local culture, and making strategic business decisions. By following the steps outlined in this guide and seeking professional assistance when necessary, you can establish a successful and compliant business in one of the world’s most beautiful and dynamic regions.

Remember, the key to success in Bali is not just following the legal procedures but also embracing the local culture and building strong relationships within the community. With the right approach and the right legal consultant, your business in Bali can thrive and contribute to the island’s vibrant economy.