Ready for your company registration in Bali and Indonesia? Understand how to set up your PT PMA company, including choosing an efficient tax structure.
- Foreign investors can choose between a PT PMA or Representative Office in Indonesia.
- The company registration process of a PT PMA takes between 5 days to 2 weeks.
Types of companies for foreign investor in Bali and Jakarta
Foreign investors choosing between PT PMA, Local PT Company, and Representative Office in Bali
Foreign investors seeking to establish a presence in Bali must first understand the various business entities available to them. The decision on whether to set up as a PT PMA, Local PT Company, or Representative Office should align with your specific business plans and requirements, each offering distinct advantages and constraints.
Delving into these legal entity options for conducting business is essential for understanding their individual characteristics and how they can serve different entrepreneurial needs.
PT PMA: Foreign-owned Limited Liability Company
To establish a PT PMA (Perseroan Terbatas Penanaman Modal Asing), which is a type of limited liability company for foreign investors, it requires to have at least two shareholders. These shareholders can be individuals or legal entities, and there is no restriction on nationality, allowing 100% foreign ownership on some sectors.
The capital of PT PMA is set at IDR 10 billion, which is approximately USD 700,000, depending on the current exchange rate. The capital of a PT PMA is the liability of the shareholders. In other words, this capital is the amount the shareholder are exposed to.
The PT PMA is the only type of company foreigners can legally open in Indonesia. Foreigners can work inside the company as director, commissioner or employees. A PT PMA requires to have a resident director having a tax number (NPWP). Foreigners can become resident by applying for a KITAS in order to get this tax number. An investor can apply for an investor KITAS or working KITAS as director of the company. It is not mandatory for a company to use a local director.
The director of the PT PMA is in charge to conduct and drive the company while the commissioner is representing the shareholders and ensure the company is compliant.
Local PT Company (PT PMDN)
The capital requirement for a PT PMDN is significantly lower than that of a PT PMA, with the minimum paid-up capital starting from IDR 50 million, depending on the size and scope of the business. However this form of company is not open to foreign investment. Despite some actors sell it as SPV, nominee shareholder is illegal in Indonesia and no contract can legally protect you.
However, a foreigner can legally work as director of a local PT if the company increase the declared capital to 1 billion IDR.
Representative office KP3A or KPPA
A Bali-based Representative Office, also known as Kantor Perwakilan Perusahaan Asing (KPPA) in Indonesia, is a non-income generating extension of an overseas parent company. It is primarily established for the following purposes:
- Conducting in-depth market research and analysis to understand the local market dynamics and consumer preferences.
- Maintaining and fostering business relations with local and regional partners, clients, and distributors.
- Facilitating and coordinating promotional activities, such as participating in trade exhibitions and hosting business seminars, to enhance the visibility and brand presence of the parent company in the Indonesian market.
- Engaging in other non-commercial activities that support the interests of the parent company, such as overseeing product quality and standards, providing after-sales service, and gathering business intelligence.
Setting up a Representative Office in Bali offers several strategic benefits for international companies:
- It allows for a low-risk entry point to explore the Indonesian market and assess business opportunities without the need for a large capital investment.
- The establishment procedure is relatively straightforward and faster
- Representative Offices are exempt from the requirement to submit an investment plan, which is typically mandatory for other types of business entities.
- They enjoy certain tax advantages, such as being exempt from corporate income tax, since they do not engage in direct sales or revenue-generating activities.
However, it is crucial to note that Representative Offices are restricted in their scope and are not allowed to conduct direct sales or transactions that result in income. Their role is limited to preparatory and auxiliary activities that pave the way for the parent company’s future investment or business expansion in Indonesia.
Process to register a company in Bali or Jakarta
The registration process takes 5 days to 2 weeks depending on the business sector. The process can be done online or on site.
- Define the business classification
- Find a company name
- Elaborate the best tax structure
- Register the business with a commercial address
- Establish the deed of the company
- Get a tax number (NPWP)
- Apply for the business identification number (NIB)
Executing this process requires thoughtful preparation and attention. We will delve into these steps with greater detail and precision.
Legal Requirements and documentation
Registering a company in Bali involves meeting key legal requirements. For a foreign-owned PT PMA, necessary details must be provided including the company’s name, scope of business activities, and the official business address. Founders are expected to submit scans of their passports along with specifying the organizational framework concerning directors and shareholders.
Businesses that potentially affect the environment have to comply with certain regulations designed for environmental protection by acquiring appropriate environmental licenses. Depending on what your business entails specifically, you may also require to register your products, connect your company to the custom or get additional license such as alcohol license or BPOM certification.
Securing a Commercial Address or Virtual office
A commercial address is mandatory to register a company in Indonesia. A villa or residential address cannot be used as an official company address. A virtual office with a proper license can be suitable depending on your business activity. However some business activities require to have a physical address.
Opening a corporate bank account in Bali or Jakarta
In order to open a bank account for your company in Bali that is foreign owned, you must present several critical legal documents. These include the deed of establishment, the NPWP (company tax number), and the business license (NIB). Banks may also require that either the director of the company or an authorized delegate be physically present to complete this process, with specific requirements varying based on individual bank protocols. Most bank require the director to have a KITAS if the director is a foreigner.
It’s advised for companies foreign owned to consider major Indonesian banks such as OCBC, BNI, Mandiri, or BCA.
Obtaining business license and Permits
Prior to commencing operations, it is essential that your company secures the appropriate business licenses and permits. These are compulsory for all businesses within Bali or Jakarta. For industries such as healthcare, production of medical devices, and hospitality, additional certifications and licenses may be necessary before you can commence business activities.
It should also be noted that in Bali, business operations are categorized into three distinct risk categories: low, medium, and high. As stipulated by Government Regulation 5/2021, each category determines the specific operational licenses a business must obtain.
Visa and Work permit options for foreigners in Indonesia
If you’re a foreign national living and working in Bali, Jakarta or the rest of Indonesia, understanding the various visa and work permit options is crucial for ensuring your stay is both legal and hassle-free. There are two types of KITAS (Kartu Izin Tinggal Terbatas) that are particularly relevant for expatriates setting up a company in Indonesia:
- The Working KITAS is a limited stay permit for foreign individuals working in Indonesia. The Working KITAS is usually valid for one year and can be extended. It also requires a work permit (IMTA) from the Ministry of Manpower, which the sponsoring company must secure. The Working KITAS allows you to receive a salary and other formal employment benefits and work as a director or commissioner in your company. You can also hire foreigners and apply for working KITAS for them.
- The Investor KITAS is for foreign investors who hold a certain amount of shares in an Indonesian company. This type of KITAS is beneficial as it exempts the holder from the requirement of having a work permit, simplifying the process and reducing the paperwork involved. The Investor KITAS can be valid for one or two years, depending on the investment amount, and is extendable. The investor KITAS doesn’t allow the foreigner to work in Indonesia.
For both types of KITAS, applicants are required to provide:
- A passport with a minimum validity of 6 month
- Recent color photographs
- Proof of financial capability, such as a bank statement
- Documentation from the company in Indonesia, including the company’s business license
Foreigners aiming to secure legal employment status in Indonesia will need to navigate through these options and adhere to the stipulations set forth by the Indonesian government.
Taxation and reporting requirements for companies in Bali and Jakarta
Running a business in Bali involves not only establishment and management processes, but also adherence to the region’s tax regulations, including timely reporting requirements. Businesses with an annual gross income no greater than IDR 4.8 billion benefit from a lower corporate income tax rate of just 0.5%. It is mandatory for all businesses within Bali to file their tax reports monthly as part of adhering to these regulations.
The imposition of corporate taxes in Bali is unbiased towards ownership types. Foreign-owned enterprises are subject to the same rates as local companies—these assessments hinge on revenue and profit figures exclusively. Certain sectors may receive tax incentives that can simplify their fiscal responsibilities through Indonesia’s Online Single Submission (OSS) system designed for this purpose.
Tips for a successful business setup in Bali, Indonesia
Legal services to set up a company in Indonesia
Navigating the legal intricacies of establishing a business in Bali can be a complex and daunting task, especially for foreign investors unfamiliar with Indonesian laws and regulations. ILA can provide invaluable assistance throughout the company setup process, offering guidance on the legal framework, handling necessary documentation, and advising on compliance with local laws.
Utilizing legal services can significantly streamline the process of setting up a company in Bali. ILA Global Consulting can help with drafting the company’s articles of association, preparing the necessary incorporation documents, and liaising with government officials to secure all required licenses and permits. We can also provide insights into the best corporate structure for your business based on your long-term goals and the nature of your business activities.
Business Visa and Pre-investment consideration
Before fully committing to setting up a company in Bali, it’s advisable for potential investors to visit Indonesia and conduct thorough on-the-ground research. This is where a business visa or a pre-investment visa becomes essential. These types of visas allow for a short-term stay in Indonesia and are specifically for individuals who are exploring business opportunities or considering making an investment in the country.
A business visa is suitable for attending meetings, seminars, and other business-related activities, but it does not permit the holder to take up employment or engage in any form of income-generating activities. On the other hand, a pre-investment visa is for entrepreneurs who need to spend time in Bali to study the local market, establish business connections, and evaluate the feasibility of their project before making the decision to invest.
ILA can assist with the application process for both types of visas, providing guidance on the documentation and ensuring that all procedures are according to Indonesian immigration policies. This service is particularly beneficial for those unfamiliar with the local regulations or who may face language barriers. By securing the appropriate visa, investors can lay the groundwork for a successful business venture in Bali with ILA’s support every step of the way.
Summary
In this comprehensive guide, we have thoroughly examined the process of establishing a business in Bali. The exploration has covered recognizing the commercial terrain, choosing an appropriate corporate structure, company registration and acquiring essential licenses and permits. It addressed how to open a bank account for your venture, secure a proper business address, as well as understanding visa and work permit protocols. Considered were adherence to tax laws and compliance with reporting obligations plus the importance of expert assistance throughout this endeavor.
FREQUENTLY ASKED QUESTIONS
HOW MUCH DOES IT COST TO SET UP A COMPANY IN BALI?
In Bali, establishing a PT PMA incurs an expense between IDR 20 million and IDR 35 million. The process of registering such an entity usually spans over a period of two to four weeks.
CAN AN FOREIGNER RUN A BUSINESS IN BALI?
A foreigner has the capability to operate a business within Bali by establishing it as either a foreign-owned entity (PT PMA).
CAN FOREIGNER DO BUSINESS IN BALI?
Individuals from abroad are capable of establishing a business in Bali by forming a PMA (Penanaman Modal Asing) company without any local partner.
WHAT ARE THE DIFFERENT TYPES OF BUSINESS ENTITIES FOR FOREIGN INVESTORS IN BALI?
Before deciding on an investment vehicle in Bali, foreign investors should evaluate the distinct types of business entities available to them—such as a PT PMA or Representative Office—based on their company’s specific requirements.
HOW LONG DOES IT TAKE TO REGISTER A COMPANY IN INDONESIA?
The full registration of a company in Bali takes 3 days to 2 week for a PT PMA.
Contact us if you need more information on how to set up a company in Bali.
