Foreign Investment in Indonesia: Complete Legal Guide for Business Formation in Bali

Starting a business in Indonesia as a foreign investor requires navigating complex regulations, company formation processes, and licensing requirements. This comprehensive guide draws from our direct experience helping hundreds of international clients establish successful businesses in Bali and throughout Indonesia.

Quick Answer: Can Foreigners Invest in Indonesia?

Yes, foreign nationals can invest and own businesses in Indonesia through a Foreign Direct Investment Company (PT PMA – Perseroan Terbatas Penanaman Modal Asing). As of 2025, Indonesia has significantly liberalized foreign investment rules, allowing 100% foreign ownership in many sectors, though certain industries remain restricted or require Indonesian partners.

Understanding Indonesia’s Foreign Investment Landscape

What is PT PMA?

A PT PMA (Foreign Investment Company) is the primary legal structure for foreign investors in Indonesia. This limited liability company allows foreigners to conduct business legally while protecting personal assets from business liabilities.

Key Characteristics:

• Minimum paid-up capital: IDR 10 billion (approximately USD 625,000)
• Requires at least 2 shareholders (can be individuals or corporations)
• Minimum 1 director and 1 commissioner
• Must comply with the Positive Investment List (DNI)

The 2025 Investment Climate

Following the implementation of the Omnibus Law (Job Creation Law) and subsequent regulations, Indonesia has streamlined foreign investment processes through the Online Single Submission (OSS) system. The government’s commitment to attracting foreign direct investment has resulted in faster processing times and reduced bureaucratic hurdles.

Current Investment Incentives:

• Tax holidays for strategic sectors (5-20 years)
• Import duty exemptions on capital goods
• Accelerated depreciation allowances
• Special Economic Zones (KEK) with additional benefits

Foreign Investment Regulations: What You Need to Know

The Positive Investment List (DNI)

The DNI determines which business sectors are open to foreign investment and the maximum foreign ownership percentage allowed. Understanding this list is crucial before starting your investment journey.

Open Sectors (100% Foreign Ownership):

• E-commerce platforms
• Pharmaceutical manufacturing
• Creative industries
• Renewable energy
• Selected tourism services
• IT and software development
• Manufacturing (most sectors)

Restricted Sectors:

• Land transportation requires Indonesian partnership
• Certain retail businesses (area and capital requirements)
• Construction services (gradual divestment required)
• Film production (maximum 49% foreign ownership)

Closed Sectors (No Foreign Investment):

• Cultivation of specific crops
• Small-scale fishing
• Traditional medicine production
• Certain cultural services

Capital Requirements Explained

The minimum investment threshold serves multiple purposes: ensuring serious business commitment, job creation, and economic contribution.

2025 Requirements:

• Paid-Up Capital: Minimum IDR 10 billion
• Authorized Capital: Minimum IDR 10 billion (can be higher)
• Alternative Option: For certain sectors, lower requirements may apply through special programs

Important Note: These requirements apply to the company registration, not the actual operational budget. Many investors maintain the minimum capital requirement while operating with separate working capital.

PMA/PT Company Formation: Step-by-Step Process

Phase 1: Pre-Registration (1-2 weeks)

Step 1: Business Sector Verification Confirm your intended business activities are permitted for foreign investment through the DNI. A legal consultant can provide accurate classification based on Indonesian Business Classification (KBLI) codes.

Step 2: Company Name Reservation Submit company name proposals through the OSS system. Names must be unique and cannot contain:

• Indonesian government institution names
• Religious connotations
• Offensive language
• Existing trademark conflicts

Step 3: Document Preparation Gather required documents:

• Valid passports of all shareholders and directors
• Proof of address (utility bills or bank statements)
• Business plan outlining activities and investment value
• Capital source declaration

Phase 2: Company Registration (2-4 weeks)

Step 4: Notarial Deed of Establishment A licensed Indonesian notary prepares the Articles of Association containing:

• Company name and domicile
• Business purposes and activities
• Capital structure
• Shareholder composition
• Management structure
• Meeting procedures

Step 5: Ministry of Law Approval Submit the deed to the Ministry of Law and Human Rights (MOLHR) through the notary. Upon approval, you receive:

• Legal Entity Decree
• Certificate of Domicile
• Company Registration Number (NIB)

Step 6: Tax Registration Automatic generation of:

• Tax Identification Number (NPWP)
• Taxable Entrepreneur Number (NPPKP) if applicable
• VAT registration for eligible businesses

Phase 3: Licensing and Permits (3-8 weeks)

Step 7: Business Licensing Through OSS, obtain necessary licenses based on risk classification:

• Low Risk: Automatic NIB serves as operating license
• Medium Risk: NIB plus standard certificates
• High Risk: NIB, certificates, and additional permits

Step 8: Sector-Specific Permits Depending on your business:

• Food and beverage: Health department permits, halal certification
• Tourism: Ministry of Tourism registration
• Import/Export: Importer Identification Number (API)
• Construction: IUJK certification

Step 9: Investment Realization Report (LKPM) Register investment realization through OSS within 30 days of capital deposit.

Phase 4: Operational Setup (Ongoing)

Step 10: Capital Injection Transfer the minimum required capital to the company’s Indonesian bank account. Obtain proof of payment for BKPM reporting.

Step 11: Office Establishment

• Secure physical office space (virtual offices generally not accepted)
• Obtain domicile certificate from local authorities
• Register office address with OSS

Step 12: Regulatory Compliance

• Appoint tax consultant for reporting obligations
• Register with labor department (Disnaker)
• Obtain mandatory insurance (BPJS Kesehatan and Ketenagakerjaan)

Business Licensing in Bali: Special Considerations

Bali’s unique cultural and environmental landscape adds specific requirements for businesses operating on the island.

Provincial Regulations

Tourism-Related Businesses: Bali has implemented stricter oversight of tourism businesses to preserve cultural integrity and environmental sustainability.

Requirements include:

• Local community consultations (for certain locations)
• Environmental impact assessments (AMDAL) for large developments
• Cultural preservation commitments
• Waste management plans

Hospitality Sector (Villas, Hotels, Restaurants):

• Zoning compliance verification
• Building permits (IMB) from local government
• Fire safety certificates
• Food safety permits (for F&B)
• Tourism business registration (TDUP)

Location Advantages

Why Bali?

• Established expatriate infrastructure
• International airport connectivity
• Tourism-driven economy
• Lower operational costs than Jakarta
• Attractive lifestyle for international employees

Business Hubs in Bali:

• Seminyak/Canggu: F&B, retail, creative industries
• Ubud: Wellness, education, sustainable businesses
• Sanur: Professional services, consulting
• Denpasar: Manufacturing, distribution, corporate offices

KITAS/Visa Regulations for Investors and Employees

Investor KITAS (Limited Stay Permit)

Foreign shareholders and directors require proper immigration status to manage their Indonesian companies.

Investor KITAS Eligibility:

• Shareholder of registered PT PMA
• Director or commissioner position
• Investment value meets minimum requirements

Application Process:

1. Obtain IMTA (Work Permit) through OSS
2. Submit ITAS (Temporary Stay Permit) application via sponsor company
3. Arrive in Indonesia with visa approval (e-VOA or visa on arrival)
4. Complete biometric registration at immigration office
5. Receive KITAS card (valid 1-2 years, renewable)

Required Documents:

• Passport (minimum 18 months validity)
• Company deed and MOLHR approval
• IMTA approval letter
• Business license (NIB)
• Tax registration
• Proof of capital investment
• Health insurance coverage
• Sponsor letter from company

Employee KITAS

Foreign employees require work permits through a different process.

Eligibility Requirements:

• Relevant educational background
• Minimum 5 years work experience (some sectors)
• Position not available in local talent pool
• Company has mandatory Indonesian employee ratio

Key Regulations:

• Maximum foreign worker ratio varies by sector (typically 30%)
• Higher management positions have more flexibility
• Technology and specialized sectors may have exemptions
• Mandatory training program for Indonesian counterparts

RPTKA (Foreign Worker Placement Plan): Companies must obtain approval for:

• Number of foreign workers
• Positions and qualifications
• Training programs for local employees
• Timeline for knowledge transfer

Family Dependent Visas

KITAS holders can sponsor immediate family members:

• Spouse (married minimum 2 years, with marriage certificate)
• Unmarried children under 18
• Parents (in specific circumstances)

Common Challenges and Solutions

Challenge 1: Capital Requirement Burden

Solution: Structure investment strategically by:

• Starting with partnership models where permitted
• Utilizing holding company structures
• Exploring Special Economic Zones with lower thresholds
• Considering service company models for consulting businesses

Challenge 2: Nominee Arrangements (Illegal Practice)

Some advisors suggest using Indonesian nominees to bypass ownership restrictions. This is illegal and risky.

Legal Alternative: Establish proper partnership with trustworthy Indonesian business partners through:

• Comprehensive shareholder agreements
• Put/call option arrangements
• Management control mechanisms
• Independent legal counsel for all parties

Challenge 3: Ongoing Compliance

Solution: Engage experienced local legal counsel and accounting firms to manage:

• Quarterly investment realization reports
• Annual company meetings and minutes
• Tax compliance and filing
• Labor law adherence
• License renewals

Cost Breakdown: Budgeting Your Business Formation

Initial Setup Costs

Expense Category	Estimated Cost (USD)
Legal consultation & company formation	$3,000 – $6,000
Notary and government fees	$1,500 – $2,500
KITAS processing (per person)	$1,200 – $2,000
Office rental deposit (Bali)	$2,000 – $10,000
Business licensing	$500 – $3,000
Initial tax registration	Included in formation
Total Initial Investment	$8,200 – $23,500

Note: This excludes the required paid-up capital (IDR 10 billion / ~USD 625,000)

Regulatory Updates to Watch

Omnibus Law Implementation

The Job Creation Law continues rolling out implementing regulations affecting:

• Simplified environmental permitting
• Flexible labor arrangements
• Streamlined business licensing
• Investment incentive expansion

Digital Economy Regulations

New focus areas include:

• E-commerce platform registration requirements
• Digital taxation for foreign companies
• Data localization requirements
• Fintech licensing frameworks

Sustainability Requirements

Growing emphasis on:

• ESG (Environmental, Social, Governance) compliance
• Carbon emissions reporting
• Sustainable business practices
• Green investment incentives

Legal Disclaimer

This article provides general information about Indonesian investment law as of December 2025. It does not constitute legal advice for specific situations. Investment regulations change frequently, and individual circumstances vary significantly. Always consult with qualified legal counsel before making investment decisions or initiating business formation processes.

The information presented reflects our professional experience and understanding of current regulations but should not replace personalized legal consultation for your specific business needs.