The Island of the Gods. A phrase to describe Bali that has stood the test of time, and evidenced in the number of tourist arrivals on the island which continues to increase every year. In fact,15% of visiting tourists decide to settle down here. Why? Because Bali provides a lifestyle choice no one can resist: the world’s most stunning beaches, excellent shopping complexes, delicious food and all the conveniences of home. If that’s not enough, your foreign currency stretches way further here, allowing you to live a comfortable lifestyle for just a few pennies of your dollar.
Settling down in another country is not an easy step yet not impossible. There are many factors to consider when relocating, so take your time and consider these tips as a start:
You’re one week into your Bali getaway, live in a luxury villa and pay half the rent you should do in Sydney/New York/London, surf every single day, drink coconuts, eat delicious food, crazy party, drive scooter all over the island, and the last thing will be you’ve got to be thinking that “Damn, I don’t want to leave, I should live here”. Bali impresses like no other place.
Whether you’re thinking of taking up permanent residency, build a house in Bali, starting a business or looking to put some investment into this tropical paradise so you could come back anytime, we’ve got a few pro tips for you.
Bali’s total economy in the third quarter of 2019 measured by Gross Regional Domestic Product at current prices recorded at Rp. 64.86 trillion and based on the constant prices (ADHK) recorded at IDR41.56 trillion ($296,000,000).
Foreigners have found the thought of setting up a lifestyle business in Bali attractive for years. With an estimated 30,000 expatriates already living in Bali, makes Bali full of business opportunities range from Bali real estate investment, business property in Bali, epic restaurant and bar, especially business in the fast-growing tourist area such as Real Estate in Berawa or Canggu.
Indonesia has several types of companies, which commonly confused foreign investors when choosing the most suitable legal entity for their business activities. We have compiled a simple yet comprehensive information about legal entities in Indonesia to help you decide how to set up a business in Bali:
PT (Perseroan Terbatas) / Limited Liability Company
What is that? Limited liability company, also called “PT,” is the most popular and most widely used form of business entity in Indonesia for carrying out business activities in various fields. PT is a company founded by a minimum of two local people as responsible shareholders, limited from the debt of the company.
How much is the capital I should prepare? According to the Government Regulation of the Republic of Indonesia Number 29/2016, the capital of Limited Liability company is set based on agreement of the founders. The paid up capital should be at least 25% of the capital investment and it needs to be deposited to the bank account of the PT. This will be then use as the proof of capital investment.
Who will be the shareholder? The company is 100% owned by Indonesian as the shareholders. Therefore, this kind of company will need to have two local people as the shareholders. The shareholder liability is limited from the company’s debt.
What kind of business I could run with this company? The company can have three main business activities and usually no limitations apply. PT can also be used in all open government tenders.
What is that? PT PMA is a company which the establishment of capital are by using foreign investor for the purpose of doing business in the Republic of Indonesia, either it is fully or partially with a domestic investor. Before you decide to establish a PT PMA, make sure you have read the Negative Investment List, because for PT PMA there are several industries that has a limitation of foreign investment.
How much is the capital I should prepare? The minimum of capital investment for PT PMA is IDR10,000,000,000 (USD800,000). This value of investment is based on cash investment, which means land, buildings, tools and/or equipment are excluded.
Who will be the shareholder? PT PMA needs to have a minimum of two shareholders (can be individuals or legal entities). The foreigner can be a shareholder in PT PMA. The maximum percentage of the shareholders are referring to the Negative Investment List.
What kind of business I could run with this company? PT PMA only able to have one business category and again it should be based on the Negative Investment List.
KPPA (Kantor Perwakilan Perusahaan Asing) / Foreign Company Representative Office
What is that? KPPA is a local representative company of the foreign parent company. This kind of company usually needed when a foreigner wants to engage in market surveillance, networking, explore business opportunities or provide other managerial support in Indonesia to the parent company abroad. It needs to be emphasized that this foreign representative office is strictly forbidden from directly engaging in operational activities, signing contracts, issuing official invoices, receiving payments from its clients, and directly engaging in any other profit generating activities.
How much is the capital I should prepare? The good thing about KPPA is there is no minimum capital to establish it, unlike the PT. PMA which you need to have USD800,000 for a minimum capital. A strategy that is often used by foreign companies is that the Rep Office promotes and offers the parent company’s products to Indonesian retailers/clients (invoices to the Indonesian client are sent by the parent company abroad). Then, after a strong client portfolio has been established, the foreign company decides to open a PT PMA in Indonesia.
Who will be the shareholder? The most significant advantage for KPPA lies in the fact that a representative office able to be completely owned by one or more foreigners. A representative office in Indonesia is also allowed to operate without any directors or shareholders; thus, the time which would once again have been spent on recruitment will be saved. KPPA can also sponsored a KITAS for its foreigner workers. However, KITAS sponsorships are restricted by the rule that for each foreign national working at the Rep Office there needs to be (at least) three Indonesian employees. Hence, if you want two expats to work at your Rep Office in Indonesia, then you need to hire at least six Indonesian staff-members (either experts or administrative staff).
What kind of business I could run with this company? A representative office can be established in most industry sectors. There are 4 types of representative office in Indonesia:
General representative office of a foreign company (KPPA)
Representative office of a foreign trading company (KP3A)
Representative office of a foreign construction service company (BUJKA)
Representative office of a foreign oil and gas company (KPPA MIGAS).
Each of these types of representative offices has particular qualities which specifically pertain to certain types of business activities to be carried out.
It is important to know what structure you need to set up or establish before you do any investment in Bali. Speak to several lawyers and reputable notary to get more insight. Take your time to learn about law and regulations in Indonesia before deciding to ensure your investment in Bali is safe and secure. We also have some tips for property investment in Bali that will help you to do a secure investment in Bali.
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