Many foreigners consider setting up a lifestyle business to support themselves in Bali. Indonesia has certain rules for foreign businesses, particularly with capital and investment requirements. You must understand these regulations so you can plan how to start a lifestyle business in Bali.
In this article, we discuss key information about lifestyle businesses in Bali. We will debunk some common misconceptions about businesses in Bali. In addition to that, we will talk about the usual challenges foreigners face when starting a lifestyle business in Bali. We will also share alternative ways to set up a business in Bali.
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Common Lifestyle Businesses in Bali
There isn’t a particular niche or industry for a lifestyle business. Some of the most popular lifestyle businesses for foreigners in Bali include:
- Businesses in the food and beverage industry like restaurants or cafes
- Short-term rentals like villas or guesthouses
- Travel agencies or tour operators
- Recreation and leisure activities (yoga, surfing, diving, golf)
- Clothing and jewelry design and distribution
- Import and sales of cosmetics
- Spiritual health, holistic and wellness services/retreats
- Consulting services, for example, marketing, branding and social media management
- Photography and videography services
Watch this video and listen to the stories of entrepreneurs in Bali.
Common myths regarding doing business in Bali
We learned from our clients that there are a few misconceptions about doing business in Bali. We gathered the most common of these and discussed them below.
#1 Foreigner cannot be a director of a local company
There is no law that prohibits foreigners from being directors of a local company in Indonesia. Only one director in a local company has to be a citizen of Indonesia. Other directors can be foreigners.
#2 Local companies cannot sponsor work permits for foreigners
Local companies can sponsor work permits (KITAS) for foreigners. However, this depends on the size of the capital of the company. The number of work permits a company can sponsor also depends on its capital.
Foreign directors can get working KITAS as long as the local company fulfills requirements. For other positions, Indonesia’s Ministry of Manpower must approve the working KITAS.
#3 Local companies pay lower taxes
Businesses with foreign ownership, have the same tax rates as local businesses. The general tax rate for businesses in Indonesia ranges from 12.5% to 25%.
Note that some businesses must report additional taxes. For example, hospitality businesses must report tourism taxes. Emerhub can help you compute your corporate income tax. Our consultants will also report your taxes in Bali to comply with local laws.
#4 Having a local partner makes the company registration process faster
In Indonesia, a company with partial foreign ownership is a foreign-owned company. As such, having a local partner does not change the registration process or requirements.
Register your business in Bali.
Company registration in Bali by Emerhub
#5 Companies in Indonesia can only sponsor a limited number of work permits for foreigners
There is no regulation that specifies the number of work permits (KITAS) a company can sponsor. As stated above, the number of KITAS a local company can sponsor depends on its capital. There is no such restriction for a foreign-owned company.
The table below shows the number of KITAS a company can sponsor depending on the role.
|Foreign-owned company||Local company|
|Director||As many as needed||As many as needed|
|Commissioner||As many as needed||None*|
*Foreigners cannot be commissioners in local companies
|Other positions||Subject to the approval of the Ministry of Manpower||Subject to the approval of the Ministry of Manpower|
Ultimately, though, granting KITAS to foreign workers is at the discretion of Indonesia’s Ministry of Manpower. The ministry will decide how many KITAS a company can sponsor.
Challenges of Lifestyle Businesses
Meeting the Minimum Capital Requirements and Investment Requirements
The minimum capital requirement for foreign-owned limited liability companies (PT PMA) is IDR 2.5 billion (approx. USD 190,000). This is 25% of the investment requirement of IDR 10 billion (approx USD 675,000). Lifestyle businesses are quite small so fulfilling these requirements is difficult.
There is no need to submit an investment plan, nor show the company’s bank account. However, the Indonesian government enforces the above regulations. You must prepare a capital statement letter to prove the paid-up capital. Your company will also have to file an investment activity report (LKPM) periodically to show that you are investing money.
Emerhub can help you prepare and submit the capital statement letter and LKPM. We will make sure that you maintain compliance with Indonesia’s investment regulations.
Limited Percentage of Foreign Ownership
Many businesses are open to full foreign ownership. However, some business classifications (KBLI) only allow partial foreign ownership. There are many hospitality businesses with such restrictions.
The table below shows some examples of common hospitality businesses that do not allow full foreign ownership.
|Business||Allowed Foreign Ownership|
|Hotels (4 stars or less)||67%|
|Travel Agency/Tour Operator||70% (for investors from ASEAN countries)|
67% (for investors from non-ASEAN countries)
|Water sports and diving tours||70% (for investors from ASEAN countries)|
51% (for investors from non-ASEAN countries)
Get in touch with Emerhub to find out if your planned business is open to foreign ownership. Our consultants are ready to advise you on which KBLI best suits your planned business activities.
Regulations for Multiple Businesses Under One Company
There are regulations to note regarding multiple KBLIs under one PT PMA. For example, the minimum investment requirement of IDR 10 billion is for each KBLI. So if you have two KBLIs under your PT PMA, the minimum investment requirement is IDR 20 billion.
Additionally, there are some KBLIs that cannot be under the same PT PMA. This is the case for manufacturing and distribution KBLIs. A PT PMA cannot have both of these KBLIs.
Another thing to note is that all businesses in a PT PMA share tax reports, investment reports, and liabilities. Some people with separate businesses set up a single PT PMA together to reduce costs for registration and visas. All partners will be liable if one does not report taxes or investments correctly. All partners will also be liable if they are unable to consolidate all data on time.
Alternatives to Setting Up a PT PMA
Set Up a Company in Bali through Special Purpose Vehicle in Bali
Setting up a 100% foreign-owned PT PMA is not the only way to start a lifestyle business in Bali. You can also set up your business through a special purpose vehicle. A special purpose vehicle is a legal entity that holds shares on behalf of another party. In essence, the special purpose vehicle is just a name on the company’s documents.
With a local Indonesian company as your special purpose vehicle, you do not have to follow regulation for foreign-owned companies. Some examples of businesses where special purpose vehicles are common:
- Restaurants and cafés
- Surf and diving centers
- Yoga studios
- Travel agencies/tour operators
Through a set of agreements, you can have full control of the company even if it is under the name of the special purpose vehicle. This is a safe way of having a local entity holding your shares and will protect your interests. Emerhub can act as your special purpose vehicle in Bali. Get in touch with us by filling out the form below.
Start a lifestyle business in Bali with a special purpose vehicle.
The safe way of having a local business partner in Bali.
Are you ready to start a lifestyle business in Bali? Fill out the form below and our consultants will be happy to assist you. Our team will help you choose the option that best suits your planned business activities.