10 Crucial Questions Every Investor Must Know About PMA in Bali, Lombok, and Sumbawa to Avoid Costly Mistakes!

Introduction

Expanding your business to Bali, Lombok, or Sumbawa as a foreign investor presents exciting opportunities, but it also requires a thorough understanding of Indonesia’s legal framework. One of the most crucial aspects of establishing a business in Indonesia as a foreign entrepreneur is setting up a PMA in Bali—a Penanaman Modal Asing (Foreign-Owned Company). A PMA in Bali allows international investors to operate legally, hire employees, generate revenue, and participate in Indonesia’s rapidly growing economy while ensuring full compliance with government regulations.

However, the process of setting up a PMA in Bali can be complex. It involves navigating various licensing requirements, investment limitations, and compliance obligations imposed by Indonesian authorities. Foreign investors must be aware of the necessary capital requirements, sector-specific restrictions, and the step-by-step procedures to successfully establish their business. Without proper guidance, the process can be overwhelming and time-consuming.

To help you make informed decisions, this article addresses the 10 most frequently asked questions about setting up a PMA in Bali, Lombok, and Sumbawa. By understanding these key aspects, you will be better prepared to launch and grow your business with confidence, ensuring long-term success in Indonesia’s dynamic market.

A PMA (Penanaman Modal Asing) is a business entity in Indonesia that allows foreign individuals or companies to own either a partial or full stake in a business. It is the only legal structure that permits foreigners to engage in commercial activities without requiring an Indonesian partner, although certain industries may have specific ownership restrictions. For investors looking to establish a business in Indonesia, particularly in key investment areas like Bali, Lombok, and Sumbawa, setting up a PMA in Bali is essential to operate legally and securely.

1. Why Do Foreign Investors Need a PMA?

Setting up a PMA in Bali is crucial for international entrepreneurs who want to establish and grow their businesses while ensuring compliance with Indonesian regulations. Here are the main reasons why foreign investors need a PMA in Bali:

• Legal Business Ownership: A PMA in Bali provides foreign investors with the legal right to own and operate a business in Indonesia, allowing them to fully control their investments within the permitted sectors.
• Access to Business Licenses and Permits: Without a PMA in Bali, foreign entrepreneurs cannot obtain essential business licenses, which are required to run a legally recognized operation. A PMA in Bali ensures that all necessary documentation and approvals are in place.
• Employment of Local and Foreign Workers: A PMA in Bali enables foreign investors to hire both Indonesian employees and expatriates legally, providing the necessary work permits and visas for foreign professionals.
• Profit Repatriation: One of the biggest advantages of a PMA in Bali is the ability to legally transfer profits back to the investor’s home country without legal complications, ensuring financial security and transparency.
• Credibility and Market Access: Operating under a PMA in Bali enhances business credibility, allowing foreign investors to enter various industries and compete in Indonesia’s thriving economy.

For any foreign entrepreneur looking to expand into Indonesia, especially in the tourism, real estate, hospitality, or F&B sectors, establishing a PMA in Bali is the first step toward a legally compliant and successful business.

2. What Are the Main Requirements to Establish a PMA in Bali, Lombok, or Sumbawa?

Setting up a PMA in Bali requires foreign investors to meet several key legal and financial requirements established by the Indonesian government. These regulations are designed to ensure that foreign-owned companies contribute to the country’s economic growth while maintaining compliance with local laws. Whether you are investing in tourism, hospitality, real estate, or other industries, understanding the necessary requirements is crucial to a smooth and successful business setup.

Here are the main requirements to establish a PMA in Bali:

✅ Minimum Investment – A PMA in Bali must have a minimum investment plan of IDR 10 billion (~$650,000 USD) per business sector, excluding land and building assets. This requirement ensures that foreign businesses contribute significantly to the Indonesian economy.

✅ Paid-Up Capital – To officially register a PMA in Bali, foreign investors must deposit at least IDR 2.5 billion (~$165,000 USD) into the company’s corporate bank account. This capital serves as proof of financial capability and commitment to the business.

✅ Business Classification (KBLI Code) – Every PMA in Bali must align its business activities with Indonesia’s KBLI (Indonesian Standard Industrial Classification) system. The KBLI code determines whether a business is open to full foreign ownership or if there are restrictions on foreign participation. Some sectors require partial Indonesian ownership, so it is essential to check the Negative Investment List (DNI) for limitations.

✅ Company Structure – A PMA in Bali must have a minimum of two shareholders, one director, and one commissioner. These positions can be held by foreigners or Indonesians. However, the director is responsible for daily business operations, while the commissioner provides oversight and strategic guidance.

✅ Registered Business Address – To establish a PMA in Bali, the company must have a legal business address in a commercial zone. A residential address is not acceptable for company registration. Many investors opt for virtual offices or serviced offices to meet this requirement.

✅ Licensing and Approvals – After fulfilling the initial requirements, a PMA in Bali must obtain several business permits, such as the Business Identification Number (NIB), Investment Registration, and Sectoral Licenses specific to the industry. These permits ensure that the company can legally operate and comply with industry regulations.

✅ Tax and Compliance Obligations – Once established, a PMA in Bali must register for tax identification (NPWP) and comply with Indonesia’s corporate tax, VAT, and employment regulations. Annual financial reporting and investment activity reports (LKPM) are mandatory to maintain compliance with the Indonesian Investment Coordinating Board (BKPM).

By meeting these requirements, foreign investors can successfully establish a PMA in Bali, Lombok, or Sumbawa and start their business operations in one of Indonesia’s most promising markets.

3. Can a Foreigner Fully Own a PMA in Indonesia?

One of the most common questions foreign investors ask when considering business expansion is whether they can fully own a PMA in Bali or other regions in Indonesia. The answer depends on the business sector. While Indonesia has opened up many industries to full foreign ownership, some sectors still require partial local Indonesian ownership due to government regulations.

To determine whether full foreign ownership is allowed, investors must refer to the Positive Investment List (Daftar Positif Investasi/DPI), which outlines the specific industries that permit 100% foreign ownership and those that require an Indonesian partner. Understanding these regulations is crucial for structuring your PMA in Bali correctly and avoiding legal complications.

✅ Examples of Industries Allowing 100% Foreign Ownership in a PMA in Bali:

Certain business sectors allow foreigners to fully own a PMA in Bali, making it easier to establish a company without needing a local partner. These industries include:

• Technology Startups – Innovative and digital-based businesses, such as software development, mobile apps, and IT consulting, can be 100% foreign-owned.
• Consulting Services – Business consulting, market research, legal advisory, and management consulting firms can operate as a fully foreign-owned PMA in Bali.
• Trading Companies – Many types of trading businesses, including import/export companies, can be fully foreign-owned, provided they comply with the relevant licensing requirements.

❌ Industries Requiring Local Partnership for a PMA in Bali:

While many industries are open to foreign investment, some sectors mandate partial Indonesian ownership to protect local businesses and ensure domestic economic participation. These include:

• Retail Businesses – Foreign investors cannot fully own retail stores or supermarkets; they must partner with an Indonesian entity.
• Food & Beverage (Restaurants, Bars, Cafés) – A PMA in Bali in the F&B sector requires local ownership due to government policies aimed at supporting small and medium-sized Indonesian businesses.
• Agriculture & Fisheries – Certain agricultural activities and fisheries are restricted, requiring foreign investors to collaborate with local partners.

How to Navigate Ownership Restrictions?

For foreign investors who want to operate in restricted industries, there are several solutions:

1. Local Partnership (Joint Venture PMA in Bali) – Partnering with an Indonesian entity allows access to restricted sectors while complying with regulations.
2. Nominee Arrangements (Carefully Structured) – In some cases, foreign investors use nominee arrangements, but these must be structured carefully to remain legally compliant.
3. Alternative Business Models – Investors can explore alternative business models, such as licensing or franchising, to operate within restricted industries.

By understanding the ownership limitations and structuring your PMA in Bali correctly, foreign investors can confidently enter the Indonesian market while ensuring full legal compliance. If you are unsure about the ownership requirements for your industry, consulting with a legal expert can help you navigate the regulations effectively.

4. How long does it take to register PMA?

The timeline for setting up a PMA in Bali, Lombok, or Sumbawa generally takes 4-8 weeks, depending on:

⏳ Company Name Approval – 1-3 days
⏳ Company Deed & Notarization – 3-7 days
⏳ Legal Registration (OSS System) – 5-10 days
⏳ Tax Identification Number (NPWP) – 2-5 days
⏳ Business Licenses & Operational Permits – 10-30 days

Delays may occur due to incomplete documents, changes in regulations, or administrative backlogs.

5. What licenses does a PMA need to operate?

The required licenses depend on the industry. The most common PMA business licenses include:

📌 NIB (Business Identification Number) – Required for all companies to legally operate.
📌 SIUP (Trading Business License) – For trading and commercial businesses.
📌 Izin Lokasi (Location Permit) – For businesses with a physical location.
📌 IMB/PBG (Building Permit) – If operating from a commercial property.
📌 Environmental Permit (UKL-UPL/Amdal) – If the business impacts the environment.

Certain industries like hospitality, manufacturing, and healthcare require additional sector-specific permits.

6. What are the tax obligations for a PMA?

A PMA must comply with Indonesian tax laws, which include:

📌 Corporate Income Tax (CIT) – 22% on net profits.
📌 VAT (Value Added Tax) – 11% for businesses selling goods/services.
📌 Withholding Tax – 20% for payments to non-residents.
📌 Employee Income Tax (PPh 21) – Progressive tax on salaries.

Additionally, PMAs must submit:
✅ Monthly Tax Reports
✅ Annual Financial Reports (LKPM) to BKPM (Investment Coordinating Board)

7. Can a PMA hire foreign employees?

Yes, a PMA in Bali can hire foreign employees, but the process involves strict government regulations. Indonesia prioritizes local employment, meaning a PMA in Bali must justify the need for expatriates and comply with legal requirements. Hiring foreign workers without proper documentation can result in fines or legal complications.

To hire expatriates, a PMA in Bali must:

✅ Justify the Need for Foreign Workers – Certain roles, such as HR and legal advisory, are restricted to Indonesian citizens. Foreign employees are typically approved for specialized roles requiring international expertise.

✅ Obtain Work Permits (IMTA) & KITAS – A PMA in Bali must secure an Expatriate Manpower Utilization Plan (RPTKA) before applying for a Work Permit (IMTA) and a Limited Stay Permit (KITAS). These permits are mandatory for any foreign worker.

✅ Provide Training for Indonesian Employees – Companies hiring expatriates must offer training programs to Indonesian staff to ensure skill transfer and long-term workforce development.

Expatriate-Friendly Roles in a PMA in Bali

While many positions are reserved for Indonesian nationals, a PMA in Bali can hire foreigners for roles such as:

• Directors & Commissioners – Foreigners can hold leadership positions.
• Technical Experts – Specialists in IT, engineering, and manufacturing.
• Consultants – Professionals providing industry expertise and advisory services.

Key Considerations for Hiring Foreign Employees

• A PMA in Bali must act as a sponsor for expatriates and handle visa applications.
• Work permits are typically valid for 12 months and require renewal.
• Employers must pay a DKP-TKA fee (Foreign Worker Utilization Compensation Fund) to support local workforce development.

Hiring foreign employees in a PMA in Bali can be beneficial, but businesses must follow legal procedures to ensure compliance and avoid penalties.

8. Can a PMA own land or property in Bali, Lombok, or Sumbawa?

No, a PMA cannot own freehold land (Hak Milik), but it can:

✅ Lease land under Hak Sewa (Right to Use Lease).
✅ Obtain Hak Guna Bangunan (HGB) – A 30-year renewable building-use permit.
✅ Invest in Hak Pakai (Right to Use) for tourism-related businesses.

For land ownership, foreign investors often set up a local nominee arrangement or lease property under a long-term contract.

9. What are the reporting obligations for a PMA?

A PMA must submit regular reports, including:

📌 LKPM (Investment Activity Report) – Quarterly and annual updates on business activities.
📌 WLKP (Mandatory Company Activity Report) – Reporting operational details to the Ministry of Manpower.
📌 Annual Tax Report – Submitted to the Indonesian Tax Authority.

Failure to submit reports can result in fines, business suspension, or permit revocation.

10. Can a PMA be sold or closed?

Yes, a PMA can be:

✅ Sold/Transferred – Shares can be sold to new investors.
✅ Merged – Two or more PMAs can merge into one entity.
✅ Liquidated – If a PMA is no longer operational, it must be legally closed through:

• A General Meeting of Shareholders (GMS).
• Debt settlement & tax clearance.
• Official deregistration from the Ministry of Law & Human Rights.

Closing a PMA improperly can lead to legal liabilities and financial penalties.

Conclusion

Setting up a PMA in Bali can be a highly rewarding investment opportunity for foreign entrepreneurs looking to establish a presence in Indonesia. Bali, Lombok, and Sumbawa offer tremendous potential in industries such as tourism, real estate, hospitality, and digital business. However, the process of establishing a PMA in Bali involves navigating complex legal requirements, regulatory compliance, and investment policies. Without proper preparation, foreign investors may face unnecessary delays, legal issues, or unexpected costs.

A PMA in Bali requires careful planning, including meeting investment requirements, selecting the right business classification, securing necessary permits, and ensuring compliance with tax and labor laws. Understanding the challenges that come with establishing a PMA in Bali will help investors avoid costly mistakes and ensure a smooth business setup. From ownership restrictions to ongoing compliance obligations, staying informed is crucial to maintaining a legally sound and profitable business.

For investors unfamiliar with Indonesian regulations, the process can be overwhelming. Partnering with experts who specialize in PMA in Bali formation ensures that every step is handled efficiently and in full compliance with local laws. Whether you are launching a startup, expanding your company, or exploring new market opportunities, having the right legal and business support is essential.

Need expert guidance for your PMA setup? Leave the hassle to SynergyPro—your trusted partner in legal and business solutions in Indonesia. Our team of professionals specializes in PMA in Bali, Lombok, and Sumbawa, helping foreign investors establish their businesses with confidence. Contact us today for a free consultation and take the first step toward a successful investment in Indonesia!