Tips to starting a business in Bali
Bali’s property market has undergone tremendous transformation and growth over the past decade. Where there was once only sprawling rice fields has since become the bustling hubs of Seminyak and Kuta, and the eyes of property investors from around the world are now firmly fixed on the “Island of the Gods”.
Both commercial and private real estate investment in Bali have, in large part, been propelled by increased tourism to the island. There is no denying the attraction that draws so many foreigners to Bali – hot tropical weather, pristine surf beaches, stunning rice paddies and an abundance of attractions and culture just to name a few, which combined with a relaxing lifestyle, has made Bali one of the most popular regions in Southeast Asia for living and starting a business.
Bali is full of business opportunities and with an estimated 30,000 expatriates already living in Bali, with many opening bars, restaurants, venues or simply importing and exporting. But if you are thinking or planning to make the move to Bali and start a business, then there are a few things you need to know before you begin to build your business here.
How do I start a business in Bali
Before you start, spend time in Bali and research in advance the type of business that has the most chance of success. Be aware that no matter how unique your business is, the local commercial community will replicate without hesitation. Following are a few things you will require to have in place before you can set up your business.
To obtain 100% legitimate legal status, profit from investments, have full work in Indonesia and residence rights in Bali you require an Immigration Working Visa (KITAS). A tourist visa issued on entry is valid for 30 days. A business visit visa is valid for up to 60 days which will give some time to start your application.
2. Bank Account
3. Company Ownership requirements
To purchase Commercial property a foreign investment company is set up with the shareholding in your name. Your lawyer will help you organize the necessary documents and permits on your behalf, these are standard Indonesian Government issue.
PMA which is the standard legal abbreviation for Penanaman Modal Asing and is classified as a foreign investment company enabling 100 % foreign ownership with limited liability under Indonesian company law. A PMA affords maximum protection of interest for the foreign investor, however some business activities may now require an Indonesian national partner, this will require a legal-name only partner to ensure compliance. The cost of setting up you PMA company is in the region of $6500 USD and may take as long as 14 days, however you need to fulfill the minimum requirements:
- Investment plan of at least IDR 10 billion (~ $US 800,000)
- Minimum paid up capital IDR 2.5 billion
- Limitations to the maximum foreign ownership depending on the business classification (many limitations in hospitality)
Ensure you only use qualified lawyers to apply for the legal papers required for business applications, work permits and visas and always obtain a quotation for legal services first. Any legal advice is case by case specific as there are usually different rules for different areas.
4. Nominee company
Nominee company is a company where the shares are pledged and you have the full control over the company through a set of agreements. The registered shareholders are Indonesian persons or entities. The set of legal agreements makes nominee company a legal and safe way to have complete control over a company. Since the nominee shareholders will be local entities your company does not have to follow the requirements set to large scale businesses.
Examples of industries where nominee companies are common:
- Restaurants and cafés
- Surf and diving centers
- Yoga studios
- Hospitality businesses
Using companies as nominee shareholders and proper set of agreements protecting your interests is a much safer way of collaboration rather than trusting local individuals to act as nominee shareholders having control over your company. That would be risky as they could walk away with your assets at any time, or difficulties arise if they die or divorce.
5. Appoint an agent and a notary
When purchasing property in Bali (or any foreign country for that matter), it is imperative to have professionals assisting you, as there can be some unscrupulous characters who may seek to take advantage of your lack of familiarity with local laws and may lead you astray. A reputable property agency will be able to match you with properties in Bali that align with your budget and requirements.
You will also need to engage the services of a lawyer, as the Indonesian legal system is particularly complex when it comes to property ownership regulations. Their legal expertise and advice, as well as their proficiency in the local language, will be a great asset to you.
Here are some of the common business activities foreigners often conduct in Bali:
- Food and beverage related business (restaurants, workshops, cookbook launches etc.)
- Recreation and leisure activities (yoga, surfing, diving, golf)
- Clothing design and distribution
- Cosmetics import and sales
- Spiritual health, holistic and wellness services
6. Get a facility with correct build permit (IMB)
One of the biggest challenges of renting or buying property for commercial purpose is to find a facility with the correct building permit (IMB). For example – If you want to set up manufacturing in Bali your building must have a permit for „factory“. This is a crucial step and we strongly advise to avoid buildings with wrong permits because changing the wrong IMB is complicated and each district in Bali has its own additional restrictions to which areas can even be used for manufacturing. It is common to partner with an existing manufacturing facility and use their licenses or even outsource the production.
The IMB must be in accordance to the field of business you plan to run. There are several functions available, it is easier to choose a premise that has the right documents from the start.
To set a few examples of meeting your business classification:
- The IMB function for a distribution company must be “office” and “warehouse”
- Setting up a restaurant requires an IMB with the function “restaurant”
- The consulting company requires an IMB with the function “office”
If the current IMB needs changing or if you need to apply for a new IMB you will need at least 6 months to process a new one matching your business activities.
As we are not qualified legal advisers, we can only provide a general guideline as to how the process is done. For those wanting full legal advice regarding the process of starting a business in Bali, one needs to get qualified legal advice.
If you wish further information, we recommend that you contact a Lawyer/legal adviser or speak with a notary, who can help to answer any legal questions which you may have.