Company registration in Bali

Company registration in Bali

Registering a company in Bali, Indonesia, offers numerous advantages for entrepreneurs and investors interested in the region's dynamic business environment. In this article, we provide a brief overview of the key information about company registration in Bali.

Advantages of Doing Business in Bali in 2023:

• Bali offers a stable political and economic environment conducive to business growth.
• The region is undergoing significant infrastructure projects, enhancing connectivity and accessibility.
• Today, Bali is a hub for startups, attracting both Indonesian and foreign entrepreneurs. The region is also known as digital nomad hub. The island is a popular destination for digital nomads, with a thriving community of remote workers and entrepreneurs.
• You can register a company in Bali remotely, making it accessible to international investors. There are no communication barriers because English is the official language for business in Bali, facilitating communication for international entrepreneurs. The region also has favorable immigration policies for foreign investors and expatriates.
• Businesses benefit from lower operating costs, including labor and rental expenses. Legislative changes allow foreigners to rent land for extended periods, making it easier to establish a business presence. Labor costs in Bali are competitive, contributing to cost-effective operations.
• Indonesia is a member of ASEAN and has favorable trade agreements with other countries, reducing taxes and tariffs. Reduced Corporate Income Tax (CIT): The government has reduced the CIT rate from 25% to 22% (applicable in 2020-21), with a further reduction to 20% from 2022.
• Bali's strategic location, combined with its thriving business ecosystem and government incentives, makes it an attractive destination for entrepreneurs and investors looking to establish a company in Indonesia.

Business opportunities in different industries

Investing in Bali presents a plethora of business opportunities across diverse industries, including trade, tourism, and real estate. Here's a concise overview of these lucrative prospects:

1. Trade:
   • Recent changes in the positive investment list have made previously restricted business sectors accessible to foreign investors in Bali.
   • Notably, these changes have positively impacted the retail industry, allowing 100% foreign ownership.
   • Opportunities in the trade sector encompass a broad spectrum of businesses, ranging from retail shops to import and export enterprises.
2. Tourism:
   • Tourism is a pivotal driver of Bali's economy, significantly contributing to its GDP.
   • Updates to the positive investment list have expanded opportunities for foreign investment in the tourism sector.
   • Investors can explore ventures related to hotels, resorts, restaurants, travel agencies, and various other tourism-related services.
3. Real Estate:
   • The real estate sector in Bali offers investment possibilities for both commercial and personal purposes.
   • It is regarded as a relatively secure investment avenue, suitable for various purposes.

Foreign investors interested in Bali's real estate market should be familiar with the types of land rights available:

Overview of business structures available for foreigners in Bali

When conducting business in Bali as a foreigner, it's essential to be well-informed about the available business structures, as each has its own set of advantages and drawbacks. Below is an overview of the various business structures that foreigners can register in Bali:

1. Partnership:
   1. A partnership in Bali can be established by two or more individuals or entities.
   2. Partners share profits and losses equally and bear personal responsibility for all debts and liabilities.
   3. Within partnerships, there can be general partners and passive partners, each with varying degrees of involvement and liability.
   4. General partners are fully liable for the business's debts, while passive partners' liability depends on their capital contribution.
2. Limited Liability Company (PT):
   1. A PT structure in Bali shields founders from personal liability for the company's debts and obligations.
   2. This structure offers enhanced protection to owners but necessitates a larger initial investment and involves a more formal setup.
3. Foreign Investment Company (PMA):
   1. PMAs in Bali are accessible to foreign investors, regardless of the percentage of foreign ownership (whether 100%, 51%, or 1%).
   2. Some aspects of a PMA's business might still require the involvement of Indonesian citizens or entities, as specified in the Negative Investment List (DNI) and Indonesian regulations.
   3. A PMA must have at least two founders, who can be individuals or entities.
   4. When registering a PMA in Bali, you must appoint at least one Chairman and one Director.
   5. All PMAs must meet a minimum capital requirement, typically around IDR 10 billion, although exceptions exist for capital-intensive sectors.
4. Key Benefits of PT PMA:
   1. Provides a legal structure that grants foreign investors full control of their business in Indonesia.
   2. Creates employment opportunities for foreigners.
   3. Permits a foreign company to sponsor and issue KITAS (Limited Stay Visa) for its foreign employees and business visas for partners and visiting clients in Indonesia.
   4. Foreign investors interested in launching a business in Bali can also establish a representative office for skill enhancement or local market research.

When selecting a business structure for registering a business in Bali, entrepreneurs should carefully consider their business objectives, investment needs, and personal liabilities. It is strongly recommended to seek advice from specialized consultants who can offer in-depth guidance and assist in choosing a structure that aligns with your specific goals and requirements.

Starting business in Bali: Basic steps

Starting a business in Bali involves a comprehensive process that requires meticulous attention to detail and adherence to local regulations. Below is a step-by-step guide for establishing a company in Bali:

1. Select the Appropriate Legal Structure: The first crucial step is determining the most suitable legal structure for your business. This decision should align with your business activities and objectives.
2. Name Approval Application: Begin by submitting an application for name approval to the relevant authorities. Ensure you provide at least three proposed company names in your application.
3. Prepare Constituent Documents: Draft the necessary constituent documents for your company. These typically include articles of association, bylaws, and any other relevant documents that define your company's structure and operations.
4. Apply for Tax Identification Number (NPWP): Acquire a Tax Identification Number (NPWP) for your company. This number is indispensable for ensuring compliance with Indonesian tax regulations.
5. Establish a Local Bank Account: Open a business bank account with an Indonesian bank. Maintaining a local bank account is essential for conducting financial transactions and complying with financial regulations.
6. Secure a Limited Stay Visa (KITAS): If you intend to manage your business in Indonesia for an extended period, you'll need to apply for a Limited Stay Visa (KITAS). This visa permits you to reside and work legally in the country.
7. Obtain Necessary Licenses and Permits: Depending on your business activities, you may need to acquire licenses or permits from local authorities, such as the Department of Commerce. Ensure full compliance with all local regulations and requirements.
8. Register with the Local Tax Office: To fulfill your tax obligations and maintain compliance with Indonesian tax laws, register your company with the local tax office in Bali.

It is highly advisable to seek the guidance of experienced consultants well-versed in Indonesian business regulations. These professionals can provide invaluable assistance throughout the registration process, ensuring strict adherence to legal requirements and helping you navigate any regional nuances or changes in regulations.

Taxes in Bali

Understanding the tax obligations when opening a company in Bali is crucial for compliance and financial planning. Here's an overview of the key tax considerations:

• Bali imposes a flat income tax rate of 20% on net taxable income, effective from 2022.
• The VAT rate in Bali can range from 5% to 15%, depending on the nature of the goods or services provided.

Consulting with a qualified tax advisor or accountant with expertise in Indonesian tax laws is advisable to ensure compliance and optimize tax planning strategies in the dynamic business environment of Bali. Staying informed about tax updates and changes is also essential for effective tax management.

For further assistance and support in registering a company in Bali, you can contact our company specialists.