Setting up a non profit organisation (NPO) in Bali, Indonesia is a noble goal. Making it into a reality, however, can be challenging and confusing, especially if you’re a foreign individual or entity. The laws can set restrictions on the types of NPOs and even the body that composes them. They can also have some inconsistencies.
In this blog post, Cekindo summarises the basics of the process. The knowledge can help you determine the kind of help you need to set up a nonprofit organisation in Bali.
Under the umbrella of societal organisations, an nonprofit in Bali can either be one that has a legal or a non-legal entity status. If it is a legal entity, it can be either an incorporated association or a foundation (yayasan). However, one can also create an association without a legal entity. For this blog post, we’re going to talk about these two, associations and foundations.
Non Profit Organisation Type in Indonesia: Foundation
Let’s begin with foundation. Of the different societal organisations, this is the only one that’s open to foreign entities. They can be an individual or a foreign legal entity. The latter can also be a for-profit company that decides to set up a foundation.
The creation and activities of a foundation in Bali are governed by Law No. 16 of 2001. It was in full effect in 2002 but was later amended in 2004 to become Law. No. 28. This regulation is called the Law on Foundations.
This law provides the core framework of the organisation:
- It is non-profit, which means the stakeholders do not create it to generate income. (If you want to be a for-profit organisation, refer to this guideline on how to set up a company.) However, it can provide wages and salaries to some members of the organisation. We’ll delve deeper into that later.
- It follows the separation of assets, which means that the stakeholders cannot combine their personal assets with their foundation. It also suggests that the members of the board cannot use or distribute the assets of the foundation whether directly or indirectly among themselves, their employees, or other parties.
- It has a common objective, which may fall into any of the following areas: humanitarian, social, and religious.
- It is a non-membership entity, which also suggests that there are no owners to the organisation. There are only founders.
- The organisation can exist for the benefit of the public or the stakeholders. As an example of the latter, you can have a for-profit company setting up a scholarship foundation on behalf of the children of the employers.
Who’s the Founder?
A foundation can be in any of these three forms:
- Foreign foundation
- Indonesian foundation set up by a legal foreign entity
- Indonesian foundation set up by a foreign national and Indonesian citizens, or a foreign national only
In other words, a foreigner, whether an individual or a legal entity, can be a founder for an Indonesian-based NPO.
When it comes to the structure, the law states that a foundation should have three bodies. These are the governing board, executive board, and the supervisory board. For the law to recognise the organisation, it needs only one founder. But the foundation must have at least one Indonesian citizen being part of the board. The organisation also have only one person for each of these roles: treasury, chairperson, and secretary.
Taxes and Wages
A non-profit organisation in Bali that is a foundation not exempt from paying taxes. This is because it can still generate income even if it’s not the sole purpose of the NPO that’s why both incorporated association and foundation can open a bank account. It also means that the group pays for income tax. It is also not exempted from paying donor’s tax.
But there are also exceptions to the rule. For example, a foundation doesn’t have to pay income tax if it uses the income to build a scholarship fund or it re-invests the money back to the foundation. The latter is limited to education- and research-based NPOs.
Foundations don’t need to pay donor’s tax as well if the parties involved are not engaged in any business relationship.
When it comes to wages and salaries, the general rule is board members cannot receive benefits and wages. It is under the assumption that you took on the role voluntarily. Nevertheless, it’s possible to receive compensation if you are a full-time employee of the organisation. You can also receive a salary if you are not a founder or related to any of the board members or the founders.
If you’re a foreigner working for the foundation, you still need to process your necessary papers including a work permit.
Process of Setting Up a Foundation
There are financial requirements to set up a foundation in Bali, and this one can be confusing. One law states that the initial assets are at least IDR 100 million. Law No. 17 of 2013, however, states that it should be IDR 1 billion for foundations set up by foreign individuals (alone or with an Indonesian co-founder) or IDR 10 billion for a foreign legal entity. Besides the capital, you also need to have a foundation name.
Overview of the process of registration:
- Approach Cekindo as a business partner and we will work on the process on your behalf
- Submit your foundation’s name for approval to the Minister of Law and Human Rights. The foundation can use the approved name within sixty days.
- Prepare and apply Article of Association and Deed of Establishment
- Establish a domicile for the foundation at the local government office.
- Submit the foundation for validation to the ministry. This should be done within ten days after signing the deed of establishment.
- Obtain License of Foundation Activity and then a tax number for the foundation.
For a more comprehensive idea of the flow, read How to Establish a Foundation.
Non Profit Organisation Type in Indonesia: Association
As an NPO in Bali, an association can be either incorporated or ordinary. Both of the types are intended to conduct social, religious or humanitarian activities. Regardless of the type of association, it is membership-based.
Nevertheless, the distinction between the two is still important.
An incorporated association means a legal entity or has a legal personality and it can open a bank account. It also has to submit its articles of association and is a subject to more regulations than the ordinary ones.
Meanwhile, an association without a legal entity cannot act on behalf of the organisation. It cannot open a bank account and as it is assumed that the activities of the members are conducted by themselves only. Members sign the Power of Attorney to appoint their representative and the responsibility belongs to all members.
Its activities may be for the benefit of the public or a mutual benefit. To form such organisation, the association must have at least three Indonesian citizens. A foreigner can be part of the group if he or she has already become an Indonesian national. The reason behind this regulation is that this type of organisation is intended to facilitate human rights of Indonesian citizens.
As a membership-based organisation, its existence depends largely on the participants. They have the power to dissolve it as long as such decision is within the confines of the law. They can also receive a part of the assets they provided to the association in the event of a dissolution.
Final Thought on Non Profit Organisation Setup in Bali, Indonesia
There’s no doubt setting up a non-profit in Bali is difficult with the many laws and inconsistencies. Working with Cekindo consultants is the best option to make it as easy, convenient, and fast for you. We can guide you throughout the process.
To learn more about how to set up an nonprofit in Bali, call us at +6221 80660999. You can also send us an email at firstname.lastname@example.org. One of our consultants will contact you as soon as possible.