According to Your Investment Property, more than one million Australians visit Bali every year, and most of them find themselves investing in the island. Another statistic proving the interest of Aussies in leading business in Bali claims that 4 out of 10 foreigners who consider purchasing a villa in Bali come from Australia.
As the economy in Bali, or Indonesia as a whole, has been seeing rapid growth in recent years (and buying a house or incorporating a company in Australia gets nearly impossible), Australians have started to move north to Bali and doing business there.
Unfortunately, the proximity of both islands does not go hand in hand with legal benefits or loosened restrictions concerning foreign investment in Bali.
This article is going to address some of the requirements you need to know as Australians starting a business in Bali: visa requirements, types of legal entities in Indonesia, local sponsors, shelf companies, and property rights.
We will also suggest ways how to avoid horror scenarios such as an infamous incident of five Australian-owned restaurants closed overnight due to the fraudulent behaviour of their local partner
To enter Bali, the visa requirements for Australians have been less complex over the years, and this trend is expected to continue due to negotiations of both Australian and Indonesian governments about “some kinds of investment protections.”
The general rule when coming to Bali, a passport of an Australian citizen must be at least 6 months valid with enough space for visa stamp on the day you arrive in Bali. This rule is non-negotiable, and you will be denied even getting on the plane to fly out to Bali even in case of a visa-exempt entry.
If you come to Bali for less than 30 days to check the market and do not engage in any form of business activity, you are exempted from acquiring a visa with an Australian passport.
You will get a visa exemption to stamp upon arrival which is non-extendable and single-entry. In theory, it means you could find yourself flying there and back to get a new visa exemption stamp every month. However, this practice, called a visa run, is highly risky and several foreigners have been denied entry from Singapore.
For a stay between 30 days to 60 days, Australians have three options:
A Visa on Arrival is valid for 30 days and only be extended once. You can purchase it directly at the airport and keep the receipt needed for its extension.
A Social and Cultural Visa is valid for a straight 60 days (a sponsor letter from a local Indonesian citizen is required) and can be extended up to 4 times—each extension has stay duration of 30 days. Australian citizens are required to apply for this visa at the Indonesia Embassy in Canberra or one of the Indonesian Consulates in Australia.
However, a business visa is what you need, when considering starting a business in Bali.
For visiting purposes in Bali such as conducting market research or attending a conference, Australians can get a 60-day single entry business visa.
A multiple-entry business visa is also available even online. It is valid for up to 12 months with each visit limited by 60 days.
A business visa holder is not allowed to take up any form of employment in Bali. For work purposes, a Temporary Stay Permit is required as well as a work permit—unless being an owner of the business.
There are several types of business entities open to Australians in Bali, assuming certain conditions are met. The most common vehicles for Australians to jumpstart their businesses in Bali are the foreign-owned company (PT PMA), and the local-owned company (PT).
Other entity types include foreign representative offices.
This is a limited liability partnership that can be owned by a foreigner The percentage of the company that an Australian is allowed to own is subject to the sectors listed in the Positive Investment List (PIL).
A PT PMA company is notorious for its required paperwork and time-consuming nature during its incorporation. Therefore, the application is advised to be attempted with agencies or consultants specializing in PT PMA formation.
The advantages of PT PMA include the ability to sponsor the KITAS/ITAS and RPTKA Approval of Australians. The PT PMA can also hire other foreigners, provided that they are qualified for certain permits.
On the other hand, the disadvantages of the PT PMA are mentioned previously—the process is complex, time-consuming, and costly. The Positive Investment List that determines the percentage of ownership is also subject to periodic change.
A local PT is a limited-liability entity fully owned by Indonesian individuals. This is the least complicated type of entity to establish in Bali, however, for Australians, it is only possible only if they find a special purpose vehicle with whom they sign a special purpose agreement.
Local PT is a relatively inexpensive and hassle-free option, and also a good entity to organize. On the flip side, a small-sized local company is not able to employ foreigners and issue work permits.
Due diligence of your local partner is an essential step before signing a special purpose agreement. Do not underestimate the role of your Indonesian business partner and find the one which you can completely trust.
In a nutshell, when starting a company in Bali as an individual, a local company is the best way to go. This mainly concerns Australian citizen who wishes to purchase and rent their villas, open restaurants and bars in Ubud or start family-based businesses in Bali.
On the other hand, a foreign-owned liability company is a perfect choice for those who are planning to build or expand corporations and do not want to share ownership of their company with a special purpose vehicle agent in Bali.
The potential rewards for Australians starting a business or a company in Bali are huge. Just like everything else, while looking for a location to set up your business, planning beforehand is crucial.
There are things you need to pay attention to such as building licenses and permits, property rights, and some other restrictions.
For Australians to successfully start a company in Bali, knowing property rights is vital. For instance, Australians are not allowed to own any assets in Bali, i.e. land or property, as an individual.
However, there are some alternatives to considering the right property and land permits for your business.
Right to Build (Hak Guna Bangunan)
This permit allows you to build on certain types of land. These lands are freehold lands (for Indonesians only) and state-owned lands. You can use the land for 80 years, construct your building and run it for 30 years. This permit is designed entirely for Indonesian nationals and local companies.
Right to Use (Hak Pakai)
If an Australian is not able to set up a PT PMA, a KITAS/ITAS or KITAP holder can use this kind of land in Bali for no more than 25 years. Hak Pakai can be extended for a maximum of 80 years.
Right of Strata Title (Hak Milik Atas Satuan Rumah Susun)
The Right of Strata Title, or HMASRS, makes owning a unit of property by Australians possible. The unit means an office or an apartment, in a high-rise building. However, the land of the property does not belong to the unit owner.
If you are considering starting a company in Bali and do not want to be involved in the lengthy and exhausting process of incorporation, a shelf company could serve you better.
Several benefits that come with a shelf company include the ability to conduct business activities immediately such as invoice issuance and tender participation, an existing company bank account, a registered business address, accurate submission of reports, and credibility and trust with the longer establishment of a shelf company compared to a brand new company.
So now when you are ready to take on Bali with your business, Cekindo provides full professional business consulting and market entry services, including applying for a visa and permit applications, registering a company, special purpose vehicle services, offering shelf companies, etc.