By: Andreas James Sihite, S.H., C.MSP., C.NSP Attorney Team of Law Firm James Richard and Partners


Introduction

Bali remains one of Indonesia’s most attractive destinations for foreign investment, particularly in tourism, accommodation, restaurants, trading, technology, healthcare, education, and professional services. Foreign investors intending to conduct business activities directly in Bali generally establish a Foreign-Owned Limited Liability Company, commonly known as a PT PMA.

Although a PT PMA is established and operates in Bali, it remains subject to Indonesia’s national investment and corporate regulations. In addition, the company must comply with local regulations applicable in Bali, including spatial planning, environmental protection, tourism, building, and other sector-specific requirements.

This article provides a practical and easy-to-understand overview of the principal regulations governing PT PMA activities in Bali.

1. Legal Basis for PT PMA in Indonesia

The principal regulations governing the establishment and operation of a PT PMA include:

  1. Law Number 25 of 2007 on Investment, as amended;
  2. Law Number 40 of 2007 on Limited Liability Companies, as amended by the Job Creation Law;
  3. Law Number 6 of 2023, which ratified the Government Regulation in Lieu of Law on Job Creation into law;
  4. Government Regulation Number 8 of 2021 concerning the company’s authorized capital and the registration, establishment, amendment, and dissolution of companies;
  5. Presidential Regulation Number 49 of 2021 concerning the business fields for investment;
  6. Government Regulation Number 28 of 2025 concerning Risk-Based Business Licensing, as the latest development in Indonesia’s risk-based licensing system;
  7. Regulations issued by the Ministry of Investment/Indonesia Investment Coordinating Board (BKPM), as well as the Online Single Submission (OSS) system; and
  8. Regional regulations of the Province of Bali and the relevant regency or municipality concerning spatial planning, tourism, environmental protection, buildings, and regional taxes.

These regulations must be read together because the requirements relating to foreign ownership, investment value, licensing, and business activities may differ depending on the applicable KBLI business classification and the location of the business.


2. What Is a PT PMA?

A PT PMA is a limited liability company that:

  • is wholly or partially owned by foreign investors;
  • is established under Indonesian law; and
  • conducts business activities in Indonesia.

A foreign investor may be:

  • an individual foreign national;
  • a foreign company; or
  • a foreign legal entity.

In principle, a PT PMA may be wholly foreign-owned if the relevant business field is open to 100% foreign ownership. However, certain sectors remain subject to foreign ownership limitations, cooperation requirements with Indonesian cooperatives or micro, small, and medium enterprises, or other special requirements.


3. Capital Requirements for a PT PMA

A. Paid-Up Capital

In general, the minimum issued and paid-up capital of a PT PMA is IDR 2.5 billion, unless a specific sectoral regulation provides otherwise.

The paid-up capital must be stated in the company’s deed of establishment and properly documented in accordance with Indonesian corporate regulations. Investors should not state capital merely as a formality without having the financial ability to realize it.

B. Total Investment Value

Generally, a PT PMA is required to have an investment value of more than IDR 10 billion, excluding the value of land and buildings, for each business activity based on the applicable KBLI and project location.

However, the requirements may differ for certain sectors, including:

  • wholesale trading;
  • manufacturing;
  • construction services;
  • hotels and accommodation;
  • restaurants;
  • transportation;
  • healthcare;
  • mining;
  • technology; and
  • other sectors subject to specific regulations.

Accordingly, the capital and investment structure should be reviewed based on the correct KBLI. Selecting an incorrect KBLI may result in non-compliance with capital, licensing, and ownership requirements.


4. Requirements for Establishing a PT PMA

The establishment process generally consists of the following stages:

1. Determine the Business Activity and KBLI

The investor must determine the business activities to be conducted based on the Indonesian Standard Industrial Classification, known as KBLI.

This stage is important because the KBLI determines:

  • whether the business is open to foreign investment;
  • the applicable foreign ownership limit;
  • the required investment value;
  • the types of licenses required;
  • location requirements;
  • certification obligations; and
  • environmental and building requirements.

2. Review Foreign Ownership Restrictions

Not every business activity in Bali is open to 100% foreign ownership. The investor must review the applicable investment regulations before establishing the company.

A business field may be:

  • fully open to foreign ownership;
  • open with a foreign ownership limit;
  • open subject to certain requirements;
  • required to cooperate with cooperatives or MSMEs; or
  • closed to foreign investment.

3. Determine the Company Name and Domicile

The company name must comply with Indonesian company law. The company must also have a business address that is appropriate for its business activities.

For businesses in Bali, the proposed office or business location should be reviewed against:

  • spatial planning regulations;
  • zoning requirements;
  • regency or municipal regulations;
  • tourism zones;
  • coastal or conservation area restrictions; and
  • land lease and land-use requirements.

4. Prepare the Deed of Establishment

The deed of establishment must be prepared before an Indonesian notary and written in the Indonesian language. It generally includes:

  • the company name;
  • the company’s domicile;
  • the purposes and objectives of the company;
  • the authorized, issued, and paid-up capital;
  • the shareholders;
  • the composition of the board of directors and commissioners; and
  • the authorities and responsibilities of the company’s management and supervisory organs.

5. Obtain Legal Entity Approval

After the deed of establishment is signed, the notary submits an application for approval to the Minister of Law. Once approved, the company obtains legal entity status.

6. Register Through the OSS System

A PT PMA must register and apply for business licensing through the Online Single Submission (OSS) system.

The main documents that may be issued or processed through OSS include:

  • Business Identification Number or NIB;
  • Standard Certification;
  • business license;
  • supporting business licenses; and
  • other approvals or required commitments.

5. Risk-Based Business Licensing

Indonesia’s business licensing system applies a risk-based approach. The type of license required depends on the risk level of the relevant business activity.


A. Business Identification Number

The NIB serves as the business identity of the company and is the basis for conducting certain business activities. Depending on the circumstances, the NIB may also function as:

  • the company registration identity;
  • customs access registration;
  • registration for social security purposes; and
  • the company’s identity for licensing applications.

B. Standard Certification

For medium-risk business activities, the company may be required to obtain a Standard Certification. This may be:

  • automatically issued; or
  • subject to verification by the relevant ministry or government institution.

C. Business License

For high-risk business activities, the company must obtain the relevant business license before commencing commercial operations.

D. Supporting Licenses

In addition to an NIB, a PT PMA may require:

  • environmental approval;
  • Spatial Utilization Activity Conformity or KKPR;
  • Building Approval or PBG;
  • Certificate of Functional Worthiness or SLF;
  • sector-specific operational licenses;
  • tourism business standard certification;
  • healthcare licenses;
  • import licenses; and
  • approvals relating to the employment of foreign workers.

6. Specific Requirements for Businesses in Bali

A PT PMA operating in Bali must consider regional regulations and the unique characteristics of the island. The following matters are particularly important.

A. Spatial Planning and Zoning

Before leasing or acquiring land, the investor must confirm that the location may legally be used for the proposed business activity.

This is particularly important for:

  • villas;
  • hotels;
  • restaurants;
  • beach clubs;
  • entertainment venues;
  • fitness centers;
  • healthcare facilities; and
  • businesses located near coastal areas.

Investors should conduct a spatial planning and land-status review before signing a long-term lease or acquisition agreement.

B. Buildings and Land Use

The construction of a new building or a change in the function of an existing building may require:

  • KKPR;
  • PBG;
  • SLF;
  • environmental approval; and
  • approval for the use or management of specific land areas.

Using a building without the required approvals may result in administrative sanctions, suspension of business activities, or demolition in certain circumstances.

C. Tourism Businesses

PT PMA companies operating in the tourism sector, including hotels, villas, restaurants, travel agencies, and recreational businesses, should consider:

  • tourism business standards;
  • the applicable KBLI classification;
  • location requirements;
  • health and safety standards;
  • consumer protection;
  • waste management;
  • regional taxes; and
  • rules concerning tourism promotions and events.

Businesses should also review the applicable regulations concerning the tourism levy imposed on foreign tourists visiting Bali, as regulated under national and regional legislation.


D. Environmental and Cultural Protection

Businesses with environmental impacts must obtain the appropriate environmental documents or approvals based on the risk level of their activities.

Projects in Bali should also consider:

  • sacred areas;
  • coastal and river setbacks;
  • green zones;
  • local architectural and building requirements;
  • environmental protection; and
  • the social and cultural values of the Balinese community.


7. Prohibition on Nominee Shareholders

One of the most important issues in establishing a PT PMA is the use of a nominee shareholder arrangement. This occurs when an Indonesian citizen is listed as the formal shareholder, even though the shares are actually owned or controlled by a foreign party.

Nominee arrangements carry significant legal risks because they may:

  • violate investment regulations;
  • create disputes regarding share ownership;
  • cause the underlying agreement to be declared invalid;
  • result in the foreign investor losing control of the company;
  • lead to administrative or criminal consequences; and
  • complicate banking, auditing, and future sale transactions.

The company’s ownership structure should be transparent and comply with the applicable foreign ownership restrictions.

8. Directors, Commissioners, and Foreign Workers

A PT PMA must have the corporate organs required under Indonesian company law, namely:

  • the General Meeting of Shareholders;
  • the Board of Directors; and
  • the Board of Commissioners, where required.

Foreign nationals may serve as directors or commissioners if they satisfy the applicable legal requirements. However, foreign nationals who work and perform operational duties in Indonesia must comply with Indonesian foreign-worker regulations.

The company may be required to:

  • prepare a foreign manpower utilization plan;
  • obtain the relevant approval;
  • pay the foreign-worker compensation fund;
  • comply with reporting requirements; and
  • appoint Indonesian counterpart employees in certain circumstances.

Operational positions must be distinguished from the position of commissioner or corporate director.


9. Post-Establishment Obligations

After obtaining its licenses, a PT PMA continues to have various legal and administrative obligations.

A. Investment Activity Report

The company is required to submit an Investment Activity Report, commonly known as LKPM, through the OSS system in accordance with the applicable reporting period and business scale.

The report generally contains information regarding:

  • investment realization;
  • the use of manpower;
  • project progress;
  • business obstacles; and
  • production or commercial activities.

B. Tax Obligations

A PT PMA must comply with its tax obligations, including:

  • tax registration and administration;
  • corporate income tax;
  • value-added tax, where applicable;
  • regional taxes;
  • hotel, restaurant, entertainment, or other regional taxes;
  • employee withholding tax; and
  • withholding tax on payments to third parties.

C. Bookkeeping and Financial Statements

The company must maintain proper accounting records and retain its financial documents. In certain circumstances, the company may be required to prepare audited financial statements.

D. Employment Compliance

The company must comply with regulations concerning:

  • employment agreements;
  • minimum wages;
  • working hours;
  • occupational health and safety;
  • BPJS Health and Employment Social Security;
  • termination of employment; and
  • the employment of foreign workers.

E. Reporting Changes to Company Information

The following changes should be updated through a notary and/or the OSS system:

  • shareholders;
  • directors and commissioners;
  • company address;
  • capital;
  • business activities;
  • project location; and
  • licensing information.

10. Common Legal Risks

Some of the most common mistakes made by foreign investors in Bali include:

  1. selecting a KBLI that does not accurately reflect the actual business activity;
  2. commencing business operations before the relevant licenses become effective;
  3. leasing land in an area that is not properly zoned for the intended business;
  4. using a nominee arrangement to avoid foreign ownership restrictions;
  5. failing to submit LKPM reports;
  6. employing foreign workers without the required approvals;
  7. constructing or changing the use of a building without PBG and SLF;
  8. failing to obtain environmental approval;
  9. mixing personal and company bank accounts; and
  10. overlooking regional tax and reporting obligations.

These violations may result in fines, suspension of licenses, cessation of business activities, revocation of licenses, or disputes with business partners.

11. PT PMA Establishment Checklist in Bali

Before commencing business activities, investors should ensure that:

  •  the KBLI accurately reflects the proposed business activities;
  •  the business sector is open to foreign investment;
  •  the ownership structure complies with applicable regulations;
  •  the paid-up capital and total investment value have been properly calculated;
  •  the proposed location complies with spatial planning regulations;
  •  the land and building status has been legally reviewed;
  •  the deed of establishment has been prepared;
  •  the company has obtained legal entity approval;
  •  the NIB has been issued;
  •  all business licenses and Standard Certifications have been obtained;
  •  environmental approval has been obtained, where required;
  •  PBG and SLF requirements have been satisfied;
  •  foreign-worker requirements have been fulfilled;
  •  tax registrations have been completed;
  •  LKPM reporting procedures have been prepared; and
  •  agreements with investors and business partners have been legally reviewed.

Conclusion

Establishing a PT PMA in Bali involves more than preparing a deed of establishment and obtaining an NIB. Investors must also ensure that the business activity, ownership structure, investment value, location, buildings, environmental approvals, employment arrangements, taxation, and reporting obligations comply with the applicable regulations.

The development of the risk-based licensing system and the continuing changes to investment regulations make it increasingly important to conduct a proper review of the KBLI and sector-specific requirements. Investors are therefore advised to conduct legal due diligence before acquiring or leasing land, constructing facilities, accepting investment funds, or commencing commercial operations.