What Are the Requirements if You’re a Foreigner Setting Up a Company in Bali?

Bali is one of the most attractive destinations in Southeast Asia for foreign entrepreneurs looking to establish a company. With its growing economy, booming tourism industry, and strong cultural appeal, the island offers many opportunities for investment. However, as a foreigner, setting up a business in Bali requires navigating Indonesian law, specific regulations for foreign ownership, and licensing procedures that can be complex without the right guidance.

At The Bali Lawyer, based in Bali, we specialize in helping foreign investors and entrepreneurs understand the requirements for establishing businesses in Indonesia. This comprehensive guide explains everything you need to know about the process, legal frameworks, and conditions that apply if you are planning to set up a company in Bali as a foreigner.

Understanding the Legal Framework for Foreign Businesses in Indonesia

Foreigners are not permitted to directly establish and own businesses under their personal names in Indonesia. Instead, they must follow government regulations that set out specific structures for foreign ownership. The most common legal entity used by foreigners in Indonesia, including Bali, is the PT PMA (Perseroan Terbatas Penanaman Modal Asing), which translates to a Foreign Investment Limited Liability Company.

The PT PMA structure provides legal recognition for foreign investors and allows them to conduct business in Indonesia while also offering certain protections, such as limited liability. It is the main entry point for foreigners wishing to run companies in Bali, whether in hospitality, tourism, digital services, or other industries.

Key Requirements for Foreigners Setting Up a Company in Bali

When setting up a company as a foreigner, the Indonesian government requires that you meet several important requirements. These ensure that your business operates within the law and is properly licensed to conduct activities in Bali.

1. Choosing the Right Business Structure

Foreigners generally must use the PT PMA structure for business ownership. This entity allows majority or even full foreign ownership in some industries, although certain sectors are restricted or regulated.

Key considerations when forming a PT PMA include:

  • Defining the scope of business activities according to the Indonesian Business Fields Classification (KBLI).

  • Ensuring the chosen industry is open to foreign investment.

  • Meeting minimum requirements set by Indonesia’s Investment Coordinating Board (BKPM).

2. Investment Plan and Capital Requirements

When establishing a PT PMA, foreigners must present an investment plan. The government requires a commitment to invest in Indonesia to support the local economy. While actual financial thresholds can vary depending on the type of business, having a clear and well-documented business plan is essential to gaining approval from authorities.

3. Registered Business Address in Bali

Every company in Indonesia must have a registered address. For businesses set up in Bali, this address must be located within a commercial or business-zoned area. Private residences are generally not allowed to be used as official business addresses.

4. Obtaining Business Licenses

The type of licenses your company requires will depend on the sector in which you operate. For example:

  • Hospitality businesses such as hotels, restaurants, and villas require tourism licenses.

  • Service-based businesses may need operational permits specific to their industry.

  • Import and export businesses must register with customs and obtain relevant permits.

All licenses are issued through the Online Single Submission (OSS) system, which integrates licensing across Indonesia.

5. Local Compliance and Employment Rules

As a foreigner, you must comply with labor regulations in Indonesia. A PT PMA is permitted to hire foreign employees for positions that require specific expertise, but companies must also employ Indonesian workers and meet obligations such as social security contributions and tax withholdings.

6. Director and Shareholder Requirements

A PT PMA must have at least two shareholders, one director, and one commissioner. These roles can be held by foreigners, though in some cases, a combination of local and foreign representatives may be beneficial. Directors are responsible for the daily operations of the company, while commissioners oversee management activities.

7. Tax Registration and Compliance

Every PT PMA must register for a Tax Identification Number (NPWP). Taxes in Indonesia apply to both corporate income and employee salaries. Additionally, some businesses may be required to collect and remit Value Added Tax (VAT). Proper tax compliance is crucial to maintaining your company’s legal standing.

Industries Open to Foreign Investment in Bali

Bali’s economy is diverse, and foreigners can invest in multiple industries. Some of the most common sectors include:

  • Tourism and Hospitality: Hotels, resorts, guesthouses, restaurants, cafés, and tour operators.

  • Real Estate and Property Management: Villa rentals, property development, and property management services.

  • Creative and Digital Services: Marketing agencies, IT services, digital nomad hubs, and co-working spaces.

  • Import and Export: Businesses that facilitate international trade.

  • Education and Training: Language schools, workshops, and professional training centers.

It’s important to confirm whether your chosen sector is open to foreign investment and whether restrictions apply. Some industries require partnerships with local investors or carry limitations on foreign ownership.

The Step-by-Step Process of Setting Up a PT PMA in Bali

Foreigners who wish to establish a company in Bali will go through several steps to ensure compliance with Indonesian law:

  1. Defining Business Activities
    Select the correct KBLI codes for your business activities, as these will determine the licenses required.

  2. Submitting an Investment Plan
    Present the details of your intended investment and future operations to the Investment Coordinating Board.

  3. Company Name Registration
    Choose a unique company name that complies with Indonesian regulations.

  4. Drafting the Articles of Association
    These documents outline the company’s structure, shareholders, directors, and operations. They must be notarized by a licensed notary in Indonesia.

  5. Approval from the Ministry of Law and Human Rights
    After notarization, your company must be officially approved by the Ministry of Law and Human Rights.

  6. Tax Registration
    Obtain your company’s NPWP to comply with tax obligations.

  7. Licensing and Permits
    Secure all necessary licenses through the OSS system. This may include tourism licenses, location permits, and sector-specific approvals.

Ongoing Compliance Obligations

After successfully establishing a company in Bali, foreigners must comply with ongoing requirements. These include:

  • Annual Financial Reporting: Submission of company financial statements to relevant authorities.

  • Tax Filings: Monthly and annual tax reports must be filed.

  • Employment Reporting: Updates regarding foreign and local employees must be provided.

  • Business License Renewals: Certain permits must be renewed periodically to remain valid.

Why Work With a Legal Service in Bali?

Setting up a company in Bali as a foreigner can be complex due to the number of steps, documentation, and compliance obligations involved. Working with a professional law service ensures that your company formation process is smooth, legally sound, and compliant with Indonesian regulations.

At The Bali Lawyer, we guide foreign investors through every stage of setting up a PT PMA, from the initial planning to obtaining licenses and maintaining compliance. Our expertise ensures that your business not only launches successfully but also operates in line with local laws for long-term sustainability.

Bali offers tremendous opportunities for foreign investors, but setting up a company as a foreigner requires compliance with Indonesian regulations. Understanding the requirements for establishing a PT PMA, obtaining the right licenses, hiring staff, and maintaining tax compliance is essential to ensure your business operates legally and effectively.

By working with professionals who understand the legal landscape, you can focus on growing your business while ensuring all requirements are met. The Bali Lawyer, based in Bali, is here to provide the legal expertise and guidance you need to successfully set up your company in Indonesia.