How To Open a Business in Bali?



Opening a business in Bali is among the recurring dreams of many Westerners. It is one of the most beautiful islands in Indonesia.

How To Open a Business in Bali?

Many Europeans and Americans, not surprisingly, select it as their new home. It offers a tropical climate, beautiful beaches and breathtaking views.

Before opening a business on the island, however, you need to inform yourself well in order not to risk losing money!

Take a few minutes for yourself and make yourself comfortable. In this article, we will explain how you can work in Bali and what the most important things to know are.

How To Open a Business in Bali?


Bali: information about Indonesia

As mentioned, Bali is one of the most important islands in Indonesia.

In order to be able to invest in the territory, therefore, you need to know what the culture of the country is, how it is administered and how its economy works in general.

If we do not know the people and places we will be dealing with, the failure of our business ideas is guaranteed.

We will explain all these things below.

Population

Indonesia had more than 270 million inhabitants in 2018. It is the fourth most populous country in the world.

A curiosity lies in the fact that of these 270 million people, as many as 148 million live on Java Island, which enjoys the distinction of being the most populated island on Earth.

According to some estimates, the population will reach 315 million by 2035.

There is a great variety of ethnicities and dialects in Indonesia. In fact, there are about 400 ethnic groups and as many as 742 languages and dialects. The most widely spoken language, however, is Javanese. It is spoken by more than 110 million people.

Despite some social tensions and clashes in the past, all these ethnic groups and cultures coexist peacefully.

Among the most influential minorities are the Indonesian Chinese, who make up less than 5% of the Indonesian population. They are, however, among the richest ethnic groups and this has, in the past, repeatedly provoked the resentment of the rest of the population.

Europeans, particularly the Dutch, have in the past dominated Indonesia, which only achieved independence in the 1940s. Members of European ethnic groups living in Indonesia are called 'totok' and represent less than 0.5% of the Indonesian population.

How To Open a Business in Bali?

Religion

Indonesia holds the record of the most populous Muslim-majority country in the world. In fact, 87.17% of the population follows this religion.

As for other religions, the following breakdown was found:

6.96% of the population of the Protestant faith2.91% of the population of the Catholic faith1.8% of the population practise Hinduism3.4% of the population practise other religions

The Indonesian government officially recognises the following six religions:

IslamProtestantismCatholicismHinduismBuddhismConfucianism

Fortunately, however, the Indonesian constitution provides the freedom to practise the religion of one's choice. The various religious communities also coexist peacefully with each other.

Some religious tensions related to Islamic fundamentalism have occurred sporadically in recent years, but have disappeared quickly.

Bali is considered the 'capital' of Indonesian Hinduism. The island, also called the 'island of the gods', has more than 20,000 shrines dedicated to various deities. These are numerous and it is not possible to list them exhaustively here.

Although they are now minority religions, Buddhism and Hinduism have significantly influenced Indonesian culture.

Islam reached the country from the 13th century onwards. In particular, it was first introduced to the island of Sumatra through merchants visiting the island. Since the 16th century, Islam has been the dominant religion in the country.

Languages spoken

Officially, the national language is Indonesian. It is taught in schools and is used by politicians, businessmen and the media.

Indonesian is a variant of the Malay language and is used as a lingua franca throughout the archipelago.

Despite its widespread use in the past, Indonesian was only made an official language of the country after independence from the Netherlands in 1945.

In practice, many Indonesians speak one of the many local dialects as their first language, but they are also familiar with the Indonesian language. Among the most widely spoken dialects, as mentioned, is Javanese (which is the language of the country's main ethnic group).

How To Open a Business in Bali?

The older people also know Dutch quite well. This is due to the fact that until 1945, the entire archipelago was in Dutch hands.

An interesting fact is that, despite the fact that Dutch rule lasted 350 years, few people are fluent in Dutch. Apart from the elderly, it is chewed a little by those in legal professions, as many codes and laws were written in Dutch.

In the more touristy places, e.g. Bali, the locals understand a little English. If one wants to live permanently on the island, however, learning a little Indonesian is a must.

Culture

Indonesian culture varies depending on which part of the country we are in.

In general, we can say that its architecture sees among the major influences those belonging to the Indian architectural tradition. However, there is no lack of buildings reminiscent of European, Chinese and Arabic architecture.

Indonesians are very fond of the musical genre 'dangdut'. It consists of a mixture of contemporary pop music with influences from Malay, Indian and Arabic folk music.

Needless to say, with so many ethnic groups, each one has its own cultural peculiarities that make it unique from any other group.

One thing that all Indonesians have in common is rice. It is the basis of their cuisine.

Moreover, since the fall of Suharto's dictatorship in 1998, freedom of expression in the country has increased considerably.

In 2007, less than 10% of Indonesians had access to the internet. The web, therefore, is not among the population's favourite tools. In the main islands and cities, however, the Internet can be accessed without any problems.

The national sport is silat. This is a martial art that involves close combat using knees, elbows, hands, forearms, knives and various impact weapons.

Popular sports include badminton and football.

Generally speaking, Indonesians link the world of sports to the world of betting and are used to seeing mainly male individuals playing sports.

State order

Indonesia is a presidential republic divided into several provinces.

In total, there are 34 provinces. Five of them enjoy greater autonomy than the others due to a special statute.

The provinces are in turn divided into regencies and municipalities. The latter two are in turn divided into districts and municipalities.

If we wanted to identify geographical regions that make up Indonesia, they would be:

SumatraKalimantanJavaSulawesiSmall Sunda Islands (including Bali)MoluccasWest New Guinea

Among the main cities we can find:

Jakarta (capital of the country)SurabayaBandungMedan

As for the country's political system, it consists of a multi-party presidential republic. The president of Indonesia, therefore, is both head of government and head of state.

How To Open a Business in Bali?

The distinction between powers is made as follows:

Legislative power shared between the government and two councils representing the people.Executive power exercised by the government.Judicial power is independent of the other two powers.



Economy

Indonesia's nominal gross domestic product in 2012 was USD 879 billion. This placed the country 16th among the countries in the world with the highest nominal GDP.

In terms of gross domestic product at purchasing power parity, on the other hand, Indonesia ranks 15th in the world with a figure of just over USD 1,279 billion.

The situation is quite different when it comes to nominal GDP per capita, which is $3,594, making the country rank 114th in the world in terms of nominal GDP per capita.

The situation improves slightly if we look at GDP per capita in purchasing power parity. At $11,126, it places the country 99th among countries with the highest GDP per capita in purchasing power parity.

The Human Development Index (HDI), in 2018, was 0.694. An average value. For quick comparison, the Italian HDI is considered very high and is 0.883.

In Indonesia, the Indonesian rupiah is used. One Indonesian rupee is equal to 0.000059 euro.

In an average year, an Indonesian earns 50,351,507 rupiah.

The sector that contributes the most to GDP is services (45.3%), followed by industry (40.7%) and agriculture (14%).

Indonesia has faced several recessions, but has always managed to stabilise the value of its currency in the end.

The country is also a member of ASEAN, the Association of Southeast Asian Nations. For this reason, Indonesia enjoys good relations with the other ASEAN member states: the Philippines, Malaysia, Singapore, Thailand, Brunei, Vietnam, Burma, Laos and Cambodia.

If you want to get some facts about the cost of living in Indonesia, here is an exhaustive list of the prices of many goods in Indonesia.




Residence permit for living in Bali

In order to travel to Bali, you will of course need a residence permit.

The basic requirement for entering Indonesia is to have a passport with a residual validity of at least 6 months from the time you enter the country.

Your passport must also have two consecutive free pages and be in excellent condition.

There are various types of visas for entering Indonesia. We will now describe them in detail.

30-day tourist visa

The easiest visa to obtain to enter Indonesia is the Free Entry Visa.

Although it is commonly referred to as a visa, the Free Entry Visa is not a real visa. In fact, it simply consists of a stamp that allows you to visit the country as a tourist for 30 days.

The day of arrival and the day of departure are included within the 30-day period.

To apply for this visa, in addition to complying with the aforementioned passport requirements, all we have to do is go to the border control immediately after we disembark in the country.

The Free Entry Visa, therefore, does not require any paperwork prior to departure and is totally free of charge.

This type of visa can only be obtained by entering the country via certain airports and ports. They change all the time, so inform yourself well before leaving.

Note that it is not enough for the visa to be obtainable in the city of arrival, but it must also be obtainable in the city of departure.

Should you exceed the 30-day stay, you will be forced to pay a fine of IDR 300,000 per day (approximately EUR 17).

Visa on Arrival of 60 days

The Visa On Arrival allows those who obtain it to stay in Indonesia for a full 60 days.

It allows applicants to stay 30 days in the country, but unlike the Free Entry Visa it is renewable for up to 60 days.

As with the Free Entry Visa, it can be applied for upon disembarkation. The passport will be stamped with the letters 'VOA'.

In order to extend the VOA, it is necessary to apply to the Kantor Imigrasi. These are Indonesia's immigration offices and are located in the country's major cities.

In order to extend the VOA, we need to show the Kantor Imigrasi a document certifying the date of our entry into Indonesia.

You will need to visit a Kantor Imigrasi at least three times if you want to renew your VOA:

During the first visit, we will have to fill out forms requesting information such as our accommodation in Indonesia. During this first appointment, we will have to hand in our passport, which will be kept until the end of the process. We will also be given a voucher, which we will have to keep until the next meeting.During the second meeting, we will have to pay the fee for the visa extension, leave our fingerprints and have our photo taken. The immigration office may ask us some general questions.At the third and final meeting, the duration of the VOA will be extended.This whole process takes about seven days. For this reason, many tourists outsource this paperwork to local travel agencies.

The VOA costs around EUR 30 when it is issued. If the duration is extended, we will also have to pay another 30 euros or so.

How To Open a Business in Bali?

60-day tourist visa

If you are already certain that you need to stay in Indonesia for a maximum of 60 days, this visa is suitable for you.

This type of visa can be applied for at the Indonesian Embassy in Italy and costs € 50. It can also be obtained by relying on a travel agency that will take care of all the bureaucracy for us.

Social visa

must be requested at least 60 days before the date of departureentitles you to only one entry into the country (you cannot enter and exit several times in the 60 days)requires a return flight ticket6-month socio-cultural visa

This type of visa is also called 'Sosial Budaya Visa' (Sosbud).

It must be applied for through the Indonesian Embassy in Italy or through sponsorship by a person resident in Indonesia who declares that he/she wishes to host us during our stay.

In addition to the classic documents, it will also be necessary to present a document from our eventual sponsor and a letter on plain paper written by the latter and containing all the necessary references concerning the stay.

This visa has an initial validity of 60 days and must be renewed every month by paying a fee of 355,000 rupees.

Other types of visas

The types of visas we have shown you are particularly suitable for those who want to get a feel for the territory before going to work or starting to invest in Bali.

However, there are also other types of visas specifically for those who want to work or move permanently to Indonesia. They vary from case to case and we recommend that you consult an agency or a specialised website to find out which one is right for you.

Which employee jobs you cannot do in Bali

If you are planning to move to Bali, you should know that as an employee you will not be able to do all the jobs available.

In fact, people with foreign citizenship can only occupy roles that require certain skills and qualifications. If you want to do a job that requires no skills or is very common (labourer, mechanic, cleaner), you will not be able to do it. These jobs, in fact, are reserved for Indonesian citizens.

Indonesia, unfortunately, is one of the most notorious countries in terms of the high bureaucracy faced by foreign workers who want to move to the country.

It is no coincidence that the percentage of foreign workers out of the total number of workers in the country is only 0.1 per cent.

In 2018, fortunately, a law was enacted that slightly reduced the bureaucracy faced by foreign workers. However, it still did not solve all the problems related to employment for foreign nationals in Indonesia.

Job positions that cannot be filled by foreigners

According to a 2012 law, there are 19 job positions in Indonesia that cannot be filled by foreign workers. They are (some of them we report in English to avoid distortion of meaning):

Personnel managerIndustrial relations managerHuman resources managerPersonnel development supervisorPersonnel recruitment supervisorStaff placement supervisorEmployee Career Development SupervisorPersonnel Declare AdministratorManaging DirectorPersonnel and career specialistPersonnel SpecialistCareer AdvisorJob AdvisorJob Advisor and CounselingEmployee MediatorJob Training AdministratorHuman Resources InterviewerJob AnalystJob Security Specialist

In addition to the above positions, Article 42:4 of the Labour Force Law of the Republic of Indonesia also emphasises that workers with foreign citizenship in Indonesia may only occupy certain job positions for a certain period of time.

Employee jobs granted to foreign nationals

Indonesian law also lists a number of jobs that can be performed by foreign nationals.

These jobs are in the garment industry, the metal industry, the furniture industry, the shoe industry and the aviation industry.




Opening businesses in Bali

If looking for a job as an employee in Indonesia is complicated enough, starting a business (perhaps in Bali) is a much smarter idea.

The country is a popular tourist destination for Europeans and North Americans. Investing in tourism-related businesses, especially on islands like Bali, can be a good idea.

According to McKinsey, as many as 90 million Indonesians will become part of the consumer class by 2030. This means that consumer goods companies will see an additional trillion dollars spent annually by new consumers.

The country has also been positively assessed in terms of economic reforms that make it easier to do business within the country.

Corruption, which used to be a real scourge in the past, has also seen a drastic decline.

All this makes us understand why many people look hopefully to Indonesia as a promised land in which to invest their savings.

In order to start a business in Indonesia, however, it is necessary to know the local laws, otherwise you risk losing a lot of money.

Many investors recommend contacting the Indonesian Investment Coordination Board or relying on a reliable local agent. Others, on the other hand, advise asking other European or North American investors directly and conducting business directly from there.

Useful links include that of the Indonesian Chamber of Commerce and Industry.

The advice, if you do not have any trusted contacts, is to travel there and handle all negotiations yourself. A prerequisite, of course, is to know the language and the laws.

Types of companies in Indonesia

Foreign nationals can only open certain businesses in Indonesia. Like salaried jobs, in fact, certain sectors are off limits to foreigners who want to invest in the country.

Foreigners can generally set up a PT PMA (Perseroan Terbatas Penanaman Modal Asing). This corresponds to our limited liability company.

To understand which sectors are restricted, we recommend that you consult the 'Daftar Negatif Investasi'.

PT PMAs may be 100 per cent foreign-owned or may see part of the ownership in the hands of a local citizen.

There are sectors that are partially closed to foreign investment. Some sectors have a maximum percentage share of ownership of a PT PMA that can be in the hands of a foreign national.

Another type of company that we can open are so-called representative offices (KPPAs). They allow us to get a feel for the country's market and, should we wish to continue our adventure, we can turn our KPPA into a PT PMA.

What is needed to open a company

To found a PT PMA, there must be at least two shareholders. One of the two shareholders must also be foreign.

Being a foreigner, the shareholder will have to be assigned a tax code (called NPWP) and will have to obtain a work permit (called KITAS).

To set up a company in Indonesia, it is necessary to contact the BKPM (the Indonesian Investment Coordination Board). It is the agency in the country that deals with investments made by foreign nationals.

If bureaucracy is not your thing, you can always rely on some local agency. As mentioned, however, you have to be sure that the agency or intermediary you turn to is trustworthy.

The Indonesian government, unfortunately, has set very high requirements for investing in the country. This is because they want to attract big foreign capital, but at the same time they want to protect small local businesses.

In order to be able to invest in Indonesia, one needs to have a minimum capital of 10 billion rupiah (approximately EUR 587,000). The capital to be paid in immediately, however, is generally 25 per cent of the total capital (so 2.5 billion rupiah equal to about EUR 146,000). This, however, varies from sector to sector and the advice is to contact the Indonesian bodies mentioned above.

In practice, however, many investors set up a PT PMA without depositing a single euro in an Indonesian bank account. In fact, in many areas, it is possible to sign a PT PMA simply by signing a paper on which it is written that you are able to transfer the necessary money to an Indonesian bank account at any time.

Below are the documents required to open a PT PMA in Indonesia:

A business licence issued by the BKPM.A principle licence issued by the BKPM.
A deed of incorporation signed by a notary public. On the deed must be the names of the founders, the names of the board members, the names of all shareholders and the names of the members of the board of commissioners.A letter certifying domicile from the local district authority.A tax number (NPWP) and the company's taxability certificate (called PKP).A business registration certificate (TDP) for integrated licence services (BPPT).A document reporting on the workforce and corporate welfare. It is issued by the Ministry of Manpower.Status of the legal entity of the PT PMA. This document is issued by the Ministry of Law and Human Rights.



Taxes in Bali

In Indonesia, unfortunately, you also have to pay taxes!

Below we quickly explain which taxes individuals pay and which taxes businesses pay.

Taxation for private persons

Individuals will be considered taxpayers in Indonesia if they stay in the country for more than 183 days.

At the end of each tax year, we will be asked to declare all our assets and all our liabilities. We will also have to pay attention to any conventions between our home country and Indonesia. Such conventions can significantly vary the percentage of tax we will have to pay, especially if we do not want to risk having to pay double taxation.

If we are late in paying taxes, we will have to pay 2% interest per month on the unpaid amount. Perpetuating this behaviour over time, however, can lead to imprisonment.

In order to get our work permit renewed, we will also have to pay contributions to the so-called social security, labour and health insurance schemes.

Regardless of where we are paid from, all our income will be subject to taxation.

Importantly, it is important to obtain a tax code at a tax office. Without a tax code we will be forced to pay an extra 20% flat rate on taxes.

Another important thing concerns the documents to be kept. All documents showing your assets, liabilities and taxes paid must be kept for at least 10 years.

Each year, the tax return must be filed at a tax office and must cover the period from 1 January to 31 December. It must be filed by 31 March of the year following the year indicated in the declaration.

There is also an electronic tax office counter.

Here are the rates applicable to taxable income:

5% + fixed amount of 2.5 million rupiah up to 50 million Indonesian rupiah15% + fixed amount of 30 million rupiah from 50 to 250 million Indonesian rupiah25% + fixed amount of 62.5 million Indonesian rupees from 250 to 500 million Indonesian rupees30% + fixed amount of 62.5 million rupees over 500 million Indonesian rupees

There are also deductions:

54 million rupees if you are a taxpayer4.5 million rupees if one is married4.5 million rupees for each economically dependent person

Corporate taxation

Companies with a permanent presence in the territory, like individuals, are taxed on income generated anywhere.

In general, the tax rate on taxable income is 25%. Dividends are taxed with a 15% withholding tax or, alternatively, contribute to the taxable income of the company.

Depending on the cause of the profit, however, taxation varies. An exhaustive list of the various taxes for legal persons can be found here.

There is also a value added tax. It affects many of the transactions carried out in the country and is 10%.




Advice from people who have already invested in Bali

We listened to some people who have already invested in Bali and the advice most of them gave us is always the same: don't trust the locals too much.

Of course, we are not saying that all Indonesians and, in particular, all Bali locals are crooks! Many Italians who have been living on the island for a while, however, have stated that they have witnessed numerous scams against small foreign investors.

The most common scams involve the purchase of real estate and land. In Bali, in fact, foreign investors can only buy land through leasing, and the price of real estate and land is often tripled by locals if they know we are foreigners.

In addition, Indonesian brokers, lawyers and notaries do not seem to enjoy a good reputation among foreign investors. Many investors, in fact, have complained about their lack of professionalism or even about some scams perpetrated against them by these 'professionals'.

Another recurring advice is to open a PT PMA with an Indonesian partner only if this partner pays at least as much capital as we do.

We have read quite a few stories of investors who have told us that they opened a company with a very old Indonesian friend and were swindled by this 'friend' immediately after the opening.

This is not so surprising. An investment of 50,000 euro, which to us may not seem exaggerated, is equivalent to more than 10 years of work putting aside 100 per cent of the salary for an Indonesian.

The advice, therefore, is to learn the basics of the language, the national laws and to travel there before making any big investments.




Conclusion on Bali

Bali is a paradise island, which can count on flourishing tourism and many services (transport, internet and so on).

Indonesian laws are not very easy to understand, but taxes do not seem to be too high. Starting a business in Bali is also much cheaper than starting a business in other parts of the world.

If one has the time and willingness to go there, investing in businesses that focus mainly on tourists, such as resorts, restaurants or hostels, can be a very good choice!

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