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Andi Refandi
Andi serves as a Senior Account Executive on Emerhub’s global team.
Bali is renowned for its unique blend of traditional craftsmanship and modern fashion trends. Artisanal craftsmanship such as ikat weaving techniques, and batik with rich natural dyes, come together with a vibrant international community of creatives, artists, and designers, making Bali a hotspot for starting a clothing business.
Whether you aim to launch a manufacturing operation or a retail store on the island, understanding the local landscape is crucial. This guide will walk you through the essential steps to establish your clothing business in Bali, addressing legal requirements, business classifications, and practical considerations.
Overview of the Clothing Manufacturing and Retail Industry in Bali
Local Incentives for Your Clothing Business in Bali
Indonesian tax incentives are in place to encourage local manufacturing and export activities. The aim is to boost economic development and job creation in Bali’s clothing industry and other sectors. Depending on your specific business model, you may qualify for some of the following incentives:
- Reduced Tax Incentives for SMEs
- Tax incentives for Exporters
- Value-Added Tax (VAT) Exemptions
With Emerhub’s tax and accounting service, we can give you insights on how to qualify for tax exemptions and tax holidays on your clothing business in Ball. Our local experts can also help you ensure corporate tax compliance by helping you navigate tax registration for your company.
Picking the Right Businesses Classification in Bali
When setting up your clothing business, it’s essential to align your business activity with the correct classification under the Indonesian Business Classification System (KBLI). Here are common classifications relevant to clothing businesses:
| Activity | Business Classification | Maximum Foreign Ownership |
| Manufacturing clothing/garments | Manufacturing | 100% |
| Distributing clothes to shops/other sellers* | Wholesale | 100% |
| Opening retail shop/boutique* | Retail Trade not in a Department Store | 100% |
| Opening an online store | E-commerce | 100% |
*Can’t be combined under the same PT PMA company.
Key Considerations for Setting Up Bali Clothing Manufacturing
Obtaining the Correct Building Permit
If you intend on setting up your own clothing manufacturer in Bali, you will need to secure the necessary building permits for running these operations. The two main permits are the PBG (Perizinan Bangunan Gedung) and SLF (Sertifikat Laik Fungsi).
PBG focuses on ensuring that construction projects are technically compliant and safe for use and must be obtained during the construction phase of your factory. SLF, on the other hand, is a certificate required to confirm that the building meets safety and functional standards before commencing operations.
To obtain a Building Permit, you need to submit the following documents to the Building Information Management System (SIMBG):
- Proof of ownership or lease of the land where the construction will take place.
- Izin Kavling if the property needs to be subdivided
- Detailed architectural plans that outline the design and layout of the building
- Building Drawings: Detailed architectural plans that outline the design and layout of the proposed building.
- Technical specifications and engineering plans that comply with local building codes
- Zoning Compliance Documentation
The permit must specify that the building is designated for manufacturing activities. Operating without the correct classification can lead to significant legal issues, including fines or forced closure of the facility. Emerhub can help secure a suitable commercial property with the correct building permits, ensuring your boutique meets all legal requirements for operation.
Compliance with Local Zoning Laws
In addition to the PBG and SLF certificates, manufacturers must obtain a Location Permit (Surat Izin Tempat Usaha – SITU) in compliance with Bali’s Zoning Laws. This permit ensures that your clothing manufacturing facility aligns with the designated use of the property as specified by local regulations.
To apply for a SITU, several key documents must be prepared:
- A formal request for the issuance of the SITU.
- Proof of land ownership or lease agreement
- A recommendation or certificate from local authorities confirming that the intended use of the property complies with zoning laws.
- Letters of support from local community leaders or village heads (RT/RW) indicating community acceptance of your business.
- A copy of your building permit)
- Environmental Impact Assessment (AMDAL) if applicable
SITU is typically valid for three years and can be renewed upon expiration, provided there are no changes to the nature of the business or its location. Renewal applications must be submitted before the current permit expires to avoid interruptions with your operations.
Product Distribution in Bali
If you already have your own line of products to market in Bali, you must register your company under the “trading” classification, allowing you to perform B2B (business-to-business) transactions. This includes wholesale distribution, supplying local retail shops and boutiques both online and physical stores with your products. It’s worth noting that B2C (business-to-consumer) sales are prohibited under this classification.
How to Start a Clothing Store in Bali
Starting a Clothing Online Shop in Bali
To start an online clothing shop in Bali, you need to choose a business structure and register your company with the Ministry of Law and Human Rights. To register, you would need the following documents:
- Deed of Establishment: drafted by a notary and outlines the company’s structure.
- Identification Documents: Passports of shareholders and directors.
- Capital requirements: Minimum paid-up capital of IDR 2.5 billion (~USD 150,000) for PT PMA and IDR 50 million (~ USD 3,300) for local PT.
- Business Address: A commercial address is required, which can be a physical office or a virtual office if you do not need a physical location.
Aside from business registration, you also need to obtain necessary licenses and permits in compliance with Indonesian regulations. Here are key licenses you should obtain before you operate an online clothing shop in Bali:
- SIUPMSE (Surat Izin Usaha Perdagangan melalui Sistem Elektronik) – a specialized Trade Business License for businesses engaged in online selling and can be obtained through the Online Single Submission (OSS) system.
- Electronic System Provider (PSE) License – to operate an e-commerce business, you would need a PSE License from the Ministry of Communication and Information Technology. This license verifies that your electronic system adheres to data protection standards and safeguards customer information.
- Business Identification Number (NIB) – a unique identification number given to all legal entities operating in Indonesia.
- Tax Identification Number (NPWP) – essential for compliance with Indonesian tax laws and should be obtained from your local tax office.
- Company Registration Certificate (TDP) – confirms that your business is officially registered and recognized by the government. This document is crucial for legal operations within Indonesia.
Opening a Fashion Boutique in Bali
Under the Negative Investment List, foreigners are prohibited from opening a B2C retail business. To circumvent this restriction, you can have a nominee arrangement with a local who will facilitate your business on your behalf. However, your business is vulnerable to misappropriation of skills and mismanagement. It is essential to draft clear agreements outlining the terms to protect your interests.
To open a fashion boutique in Bali, you would need to register your business as a local PT. You would need to obtain a SIUP, SITU, and PBG. To comply with tax regulations in Bali, you also need to obtain an NPWP.
Emerhub can assist you in starting a clothing business in Bali by providing comprehensive support throughout the registration process, including obtaining the necessary licenses and permits. Together with our local experts, we can help you navigate foreign ownership regulations, including setting up nominee arrangements to comply with Indonesian laws.
Tell us about how you want to establish your clothing business in Bali! Fill in the form below and one of our experts will get in touch.
FAQs About How to Start a Clothing Business in Bali
Like with any business in Bali, you have several tax obligations that are crucial for compliance and financial planning. Clothing businesses on the island are subject to Corporate Income Tax, Value-added Tax, and Withholding Tax. However, thanks to government initiatives to encourage manufacturing and trade in Bali, you can enjoy tax incentives and holidays.
Bali has several reputable clothing suppliers and manufacturers for your clothing business. You can explore multiple options such as Megaya Bali, known for its high-quality clothing products with low minimum order quantities, making it ideal for startups. Another excellent choice is SOVANA, which specializes in cutting and sewing ladies’ garments and caters to small-scale brands by offering low minimum orders. Additionally, One Love Clothing emphasizes ethical production practices and maintains strong relationships with skilled artisans in Bali, ensuring high standards of quality control throughout the manufacturing process.
You cannot operate multiple types of clothing businesses under one legal entity in Bali. This is due to the Indonesian government’s classification system for business activities. Each type of business activity, such as manufacturing, retail, or distribution, falls under a different business classification (KBLI), and you typically need to register a separate legal entity for each classification. For example, if you want to engage in both manufacturing and retail, you would need to establish one company for manufacturing and another for retail operations.
