How Can Foreigners Own a Business in Bali? The Complete Guide

• 5 minutes of reading

Bali is more than just a tourist destination. With its booming hospitality industry and growing expat community, the island has become an attractive place for entrepreneurs looking to start a business. From boutique hotels and beachfront cafés to surf schools and wellness retreats, opportunities seem endless. However, Indonesia has strict regulations regarding foreign business ownership, making it essential to fully understand the legal requirements before making any investment.

Many foreigners arrive in Bali with a dream of running their own business, only to realize that owning a company in Indonesia isn’t as straightforward as in their home country. Unlike locals, who can register a business under their own name, foreigners must go through a structured legal process. There are three main ways to start a business in Bali as a foreigner, Each of these options has its own advantages and challenges, which we’ll discuss in detail.

Table Of Contents
  1. Setting Up a PT PMA: The Best Legal Structure for Foreigners
  2. Partnering with a Local Indonesian Citizen
  3. Nominee Agreements: A Risky Alternative
  4. Understanding Taxes and Financial Responsibilities
  5. Which Option Is Best for Foreigners?

Setting Up a PT PMA: The Best Legal Structure for Foreigners

The safest and most recognized way for foreigners to own a business in Bali is by setting up a PT PMA (Perseroan Terbatas Penanaman Modal Asing), which translates to a Foreign-Owned Limited Liability Company. This structure allows foreigners to legally operate a business and own shares in an Indonesian company.

1. Business Classification and Investment Regulations

Not all businesses allow full foreign ownership. The Indonesian government regulates foreign investments through the Positive Investment List, which determines the percentage of foreign ownership allowed in different sectors. Some industries, like tourism and hospitality, may require a local partner to hold a minority stake.

Before setting up a PT PMA, it’s crucial to confirm whether your business sector allows 100% foreign ownership or if you need an Indonesian partner.

2. Business Registration Process

The company registration process starts with choosing a business location. Unlike small home-based businesses that can operate informally, a PT PMA must have a legally registered commercial address. This means you need to rent or purchase a business space.

After selecting a location, the business must be registered with BKPM (Badan Koordinasi Penanaman Modal), the Indonesian Investment Coordinating Board. This process requires submitting a business plan, company structure, and financial projections. Once the registration is approved, additional permits must be obtained, including:

  • Business Identification Number (NIB)
  • Tourism License (TDUP) (for hospitality businesses)
  • Environmental permits (AMDAL) (if applicable)

Once the necessary permits are in place, the next step is registering for a Taxpayer Identification Number (NPWP) and opening a corporate bank account in Indonesia.

3. Capital Requirements and Challenges

One of the biggest challenges of setting up a PT PMA is the minimum investment requirement, which is set at IDR 10 billion (around USD 650,000). While not all of this amount needs to be deposited upfront, it is still a significant requirement for small-scale investors. Despite the higher costs and complex registration process, a PT PMA provides full ownership rights and long-term business security, making it the best choice for serious investors.

Partnering with a Local Indonesian Citizen

For those who don’t want to go through the complexities of setting up a PT PMA, partnering with a local Indonesian citizen is a popular alternative. In this setup, the business is registered as a PT (Local Limited Liability Company), which can only be 100% owned by Indonesian citizens.

1. How This Structure Works

As a foreigner, you would need to find a trusted local partner to legally own the business. In exchange, you can sign a joint venture agreement or shareholder contract, outlining how profits and management responsibilities are shared. This structure is commonly used for small cafés, boutique hotels, and surf schools that don’t require significant upfront investment. Since local companies don’t have strict capital requirements, registration is faster and more affordable.

2. Risks of Partnering with a Local

The biggest downside of this setup is that the foreign investor does not have legal ownership of the company. If the local partner decides to take full control or refuses to follow the agreement, the foreign investor has little legal protection. To mitigate risks, it is crucial to have legally binding agreements and work with a reputable lawyer before entering into a business partnership.

Nominee Agreements: A Risky Alternative

Some foreigners attempt to bypass Indonesia’s business laws by using nominee agreements, where an Indonesian citizen “holds” ownership of the company while the foreigner provides the capital and runs operations behind the scenes.

While this method might seem like a simple solution, it is extremely risky and offers no legal protection. Since the business is officially owned by the nominee, there is no way to enforce agreements if disputes arise. Many foreign investors have lost their businesses through this method, making it not recommended as a secure option.

For those serious about doing business in Bali, it is best to either set up a PT PMA or establish a well-structured local partnership rather than using nominee agreements.

Understanding Taxes and Financial Responsibilities

Owning a business in Bali comes with financial and tax responsibilities. Foreign-owned companies must comply with Indonesian tax regulations, including:

  • Corporate Income Tax (22%) – Applied to net profits for PT PMA.
  • Value Added Tax (VAT) (11%) – Applied to most goods and services.
  • Payroll Taxes – Required for businesses employing staff, including contributions to BPJS (social security and healthcare).

Additionally, companies must submit annual financial reports to the Indonesian Tax Office (DJP). Non-compliance can result in fines or even business closure. It is highly recommended to work with a local accountant or tax consultant to ensure compliance.

Which Option Is Best for Foreigners?

For long-term security and full ownership rights, setting up a PT PMA is the best choice, despite the higher costs and complex registration process. It provides legal protection and allows businesses to scale without relying on a local partner. For those looking for a lower-cost and faster alternative, partnering with a local can work—but only with proper legal agreements to protect your investment.

Bali’s business regulations can be challenging, but with the right guidance, starting a business here is possible. If you’re looking for expert assistance in business registration, website development, or digital marketing, Noethera is here to help. Contact us today and take the first step toward building your Bali business dream! 🚀

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