The ability for a foreigner to open a company in Indonesia offers vast opportunities for its use.
It’s relatively clear how to set up and manage a company in Indonesia.
YOU NEED TO BE A DIRECTOR, OBTAIN ALL NECESSARY REGISTRATION DOCUMENTS, CHOOSE A TYPE OF BUSINESS ACTIVITY, GET YOUR KITAS... But there’s no point in repeating what has already been outlined step by step here - https://bali-legal.com/en/kitas-company-en.
I want to talk about the types of foreign-owned companies (PT PMA – more about types and structures of companies here - https://bali-legal.com/en/business-bali-bez-oshibok-en) - that are currently in high demand, considering the local legal system's openness towards foreigners.
The Key Drivers of Favorability, or Why Do Investors Choose Indonesia?
Income tax from 0.5%.
Weak financial oversight (virtually all payments sent to Indonesia go through with only formal checks, and any delays are usually on the side of correspondent banks, typically in China).
The ability to open not only a company but also a bank account remotely without visiting the country.
A transparent system for outgoing payment control. Even if the company has a nominal director, they don't make the final decisions—technically, all payments go through the founder.
100% of the capital is owned by the foreign investor. No local sponsor is required.
Low company setup costs. For instance, a company with a nominal director and a bank account will cost an investor about $2,000 (compare that with other countries).
From my perspective, this is not everything, but this article is not entirely about that.
Development/Investment
Why is the first focus on DEVELOPMENT? It’s due to the specifics of the local market. Many have already realized that investing in villas in Bali is a sound investment decision. Demand is rising, and supply is increasing in response.
Development cannot be considered a fully remote project, as some time on the island is necessary for construction. At the very least, you need to be there to find suitable land. However, investing in ready-made constructions is an entirely different matter.
I will briefly outline both options.
For information on land, its status in Bali, and the legal procedure for checking land, read HERE - https://bali-legal.com/en/proverka-zemli-en.
To learn how to acquire land in Bali, visit HERE - https://bali-legal.com/en/land-on-bali-en.
As Indonesian legislation states, an investor is someone who earns money from their working capital. Everything else should be organized and managed by the company's employees.
The most common investment amount can be considered to be between 500,000 - 1,000,000 USD.
In this scheme, the staff typically looks like this:
2 co-founders
1 manager (of course, a local for remote construction)
1 tax consultant/accountant (or an outsourced firm, like ours – BALI LEGAL)
1-2 foremen (depending on the volume of construction)
A staff of contracted workers (at least 10 people). Typically, these employees are recruited and brought in from Java or Sumatra.
1 manager
The official payroll fund per month looks as follows:
2 co-founders (minimum salary without taxes) - 600 USD;
1 manager (minimum salary without taxes) - 300 USD;
1 tax consultant/accountant (or outsourced firm, such as ours - BALI LEGAL) - 200 USD;
2 foremen (minimum salary without taxes - 600 USD;
10 construction workers - 3,000 - 5,000 USD.
1 manager - 300 USD
In addition to the official salaries, your payroll will account for approximately 900 USD.
Funds can come into the company's account from an external investor (under a loan agreement/investment contract) or be owned by the founders from the start.
Main tax payments from the account and expense/income items:
Income tax - from 0,5%;
Tax on using contractors - 2%;
Employee salary tax - from 0% to 35% (progressive scale). Usually, anything above the zero-tax amount is paid "under the table."
Property sale tax 2,5%;
VAT on the purchase of construction materials - 11%;
Dividend tax - 10%.
For more information about taxes in Indonesia, check this article: https://bali-legal.com/en/nalogi-v-indonezii-en.
Profitability of construction for subsequent resale:
50 - 70%, if using local contractors;
От 100%, or more if you organize the entire scheme independently.
Average selling price of a finished villa - 170 - 250,000 USD.
Average cost of building a villa - 75 - 130,000 USD.
Investing in an already established property that will generate income for a long time is also better done through a company. In this case, you will receive the maximum possible rights to use the land and the building itself.
For more details, visit - https://bali-legal.com/en/kupit-i-postroit-nedvizhimost-na-bali-inostranczu-en.
The claimed profitability of investments (according to sellers) is 15% to 25% per year.
Whether to invest in an existing property or to build one yourself is, of course, up to you, but more and more people are currently choosing the latter option. It is more profitable in terms of money, experience, and the ability to "play" with the selling price.
The scheme of investment through personal construction or already built properties is the MOST POPULAR on the island RIGHT NOW.
If you need consultation on opening a company tailored to your needs, you can easily contact our manager in Bali directly via TELEGRAM OR WHATSAPP.
Consulting
This is simpler. Consulting does not involve providing advice on Indonesian territory or regarding Indonesian legislation. You can even consult Chilean miners on water safety issues.
This can be a firm operating in any market, in any country, consulting on issues such as:
International flights
Marketing
Construction
Visa procurement
Business management, etc.
In the modern world, the consulting field is so broad that it is often difficult to discern where exactly your business is providing consulting services and where it is selling products.
This is important for understanding that PRACTICALLY ANY BUSINESS ENGAGES IN CONSULTING. THE ONLY QUESTION IS WHETHER IT CHARGES FOR IT.
Consulting is the second most popular type of remote business in Indonesia, where the owner decides to open a company remotely to process payments through it.
Why do entrepreneurs open consulting firms in Bali?
Low entry cost.. Opening such a company with a bank account can start from 2,000 USD.
Low profit tax - starting at 0,5%.
Simplicity in the banking sector allows for payments of varying degrees of “credibility” through local banks.
Standard dividend tax - starting at 10%.
IMPORTANT!!!
Regarding dividend tax, Indonesia lags behind many developed countries that have tax-free havens, such as the UAE, Hong Kong, Singapore, etc.
However, the entry threshold in these countries for Russian citizens is much higher, and in many cases, you can open a company BUT NOT A BANK ACCOUNT.
Moreover, nothing prevents you from eventually earning money through your Indonesian company and, when the conditions are favorable, withdrawing funds from Indonesia as a loan to a newly formed company in Dubai WITHOUT TAXES!!!
In this scheme, the staff composition looks approximately like this:
2 co-founders
1 manager (to open a bank account and carry out necessary initial procedures, of course a local)
1 tax consultant/accountant (or an outsourcing firm, such as ours - BALI LEGAL)
1 sales manager. It's better to hire a local salesperson or use the same nominal manager for this role.
The official salary fund per month looks as follows:
2 co-founders (minimum salary without taxes) - 600 USD.
1 manager (minimum salary without taxes) - 300 USD.
1 tax consultant/accountant (or an outsourcing firm, such as ours - BALI LEGAL) - 150 USD.
1 manager - 200 USD.
Main tax payments from the bank account and income/expense items:
Income tax - starting at 0,5%.
Tax on the use of contractors - 2%.
Employee salary tax - from 0% to 35% (progressive scale). Usually, everything above the zero-tax amount is paid "in an envelope." Salaries that are not taxed range from 200 to 300 USD.
Dividend tax starting at от 10%.
You can learn more about taxes in Indonesia from this article - https://bali-legal.com/en/nalogi-v-indonezii-en.
The profitability of this business skyrockets, usually reaching no less than 300% of the traffic cost and the service's cost itself. Additionally, with an Indonesian company, it’s very easy to:
Bypass advertising bans;
Find clients abroad;
Enhance the status of your business.
With minimal initial costs, and if you're considering which country to choose as a safe haven for your money, this option is ideal.
If you need a consultation regarding opening a company tailored to your needs, CONTACT US via TELEGRAM OR WHATSAPP.
Parallel Import / Money Transfers
I'll share the scheme for opening a company in Indonesia once again, as it is crucial for understanding the following process - https://bali-legal.com/en/kitas-company-en.
Due to recent events in Russia, many Russian companies have found themselves in a situation where it's no longer possible to simply purchase goods abroad.
Broker companies have emerged in the economic arena, helping to facilitate international transactions without taking responsibility for the goods being purchased.
These companies receive money into their bank accounts and forward it for a commission. This is all we need to understand about the parallel import process =)
Unexpectedly, we started receiving many client requests (now the third most popular query) asking to move money in this way, and not always for specific goods.
In this article https://bali-legal.com/en/luchshee-reshenie-dlya-otkryitiya-biznesa-en I want to objectively (as much as possible) analyze the countries considered part of the "second Asian tier." At least, that’s how we’ve come to think of them — but is that really the case?
Entrepreneurs are increasingly needing to transfer money from the jurisdiction of one country to the client’s account in another. And Indonesia is becoming the go-to choice for such intermediaries.
So, why is Indonesia an affordable and convenient option for financial flows?
No financial oversight and functional systems for international payment processing.
Any payment processing system (acquiring) can be connected.
Income tax is only 0.5%.
An agency contract system can be used to reduce the company’s taxable profits.
LET'S GO INTO DETAIL HERE!
One of the challenges with Indonesia's complex tax system is that companies can only benefit from the 0.5% turnover tax relief until they reach the threshold of $350,000 USD per year.
You can learn more about taxes in Indonesia in this article - https://bali-legal.com/en/nalogi-v-indonezii-en.
As you can imagine, for an exporting/importing company, this is a single day's turnover.
To maintain this benefit for as long as possible, it’s not necessary to count every transaction as company profit. You can draft a contract stating that the company’s profit is only 1% of the received funds, with the rest being treated as counterpart funds.
In this way, the company's actual profit as a money transfer agent is shown, and its turnover is reduced significantly.
In this scheme, the company’s staff structure looks like this:
2 co-founders.
1 manager (required to open a bank account and handle the necessary initial procedures, of course, a local resident).
1 tax consultant/accountant (or an outsourced firm, for example, our team – BALI LEGAL).
Official monthly payroll breakdown:
2 co-founders (minimum salary, tax-free) - 600 USD.
1 manager (minimum salary, tax-free) - 300 USD.
1 tax consultant/accountant (or outsourced firm, for example, BALI LEGAL) - 150 USD.
Main tax payments and expense/income categories:
Income tax – starting from 0,5%.
Dividend tax – from 10%.
Limitations of this business model:
Indonesian banks often impose two main requirements:
SWIFT transfers must be conducted in person at the bank branch (which is inconvenient for remote work). Therefore, it’s better to choose a bank that supports online SWIFT transfers.
The maximum SWIFT transfer amount should not exceed $100,000 USD per day. For higher turnover, you will need to establish multiple companies in Indonesia.
Despite these limitations, more and more entrepreneurs, who ensure smooth financial transactions for clients worldwide, are reaching out to us for help with setting up such companies. =).
The profit margin of this business averages around 1% of turnover. For a company processing $2,200,000 USD (the maximum monthly limit), this results in $20,000 USD of pure profit.
If you need a consultation on starting a company that fits your needs, CONTACT US via TELEGRAM OR WHATSAPP for quick communication.
Together, we will make life on the island both comfortable and legal!
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