Establishing a Business! The Cost of Starting a Business in Bali

Over a warming cup of Earl Grey tea during a blustery evening downpour, a friend was complaining about the cost of doing business here. She was in the process of converting from a CV to a PT company to maintain her KITAS and had been quoted $10,000 for the process.

 

Establishing a Business!

 

I blinked a couple of times and suggested something must have been lost in translation, but she was quite definite that that was the price. So I offered to send her some information about actual costs and you can these below. Note we are talking here about a local PT. PMDN and not a PT. PMA that can be foreign-owned. (PT stands for Perseroan Terbatas and is a limited liability company.)

 

This data about establishing a business was compiled by the World Bank in its Doing Business project. The information shown below relates specifically to Denpasar. The project checks 185 countries with 11 indicator sets. The cost and time of establishing a business is the first indicator.

 

While Indonesia currently ranks 155 in starting a business it has shown some encouraging progress since the surveys began. Since 2004, the time required has dropped from 168 days to 31, the cost to start has dropped from 136% of income per capita to 18%, and paid-in minimum capital requirements from 69% to 47%. The number of procedures has dropped from 12 to 8.

 

These times assume all supporting applications documents are available as required.

 

You can read the full World Bank report on Indonesia at http://www.doingbusiness.org/data/exploreeconomies/indonesia/starting-a-business/.

 

I have added a couple of additional items that the World Bank does not include. For example:

 

  • Before you can get any business operating licenses you must submit a valid Building Certificate (IMB) for your place of business. Either you or your landlord would have this if there is one. They are still unusual, particularly for older buildings. Don’t sign a lease unless you have a copy of a current IMB, or are prepared to pay the cost of obtaining one for the whole property.
  • You need to have a deposit slip for funds in your business bank account representing your issued and paid up shareholder equity before you will have your Deed of Establishment approved. The Paid in Minimum Capital Requirement is Rp 12.5 million or 25% of minimum Capital of Rp 50 million. To open the bank account in your business name you will need a letter from the Notary saying the business application is in the process, plus your NPWP number.

 

There are other licensing requirements not listed here for specific types of business, for example, restaurants, hotels and industrial (production.)

 

Some Regencies in Bali can be a little different in times and costs for local documents, and there are also some major differences for a PT.PMA, which I am not covering here.  But you can read more at

 

There are three key elements involved in the cost structure:

 

  • Actual registration fees– these are mostly set by law and regulation, either nationally or within a regency.
  • Notary service fees.
  • Agent service fees.

 

Seq Item By Whom Cost Time
1 Biz name clearance – Akte- company deed Notaris  200,000 4 days
2 Notarise Akte – company document (Notary fee) Notaris 2,000,000 1 day
3 PNBP fees – non-tax state revenue Bank 1,520,000 1 day
4 certificate of company domicile from the local village You  – 3 days
5 Deed of Establishment Notaris 14 days
Validation of coy as a legal entity 1,580,000
State Gazette publication BNRI  30,000
State Gazette Supplement publication TBNRI  550,000
6 Taxes: Notaris or Agent  – 2 days
Taxpayer registration number (NPWP)
Value Added Tax (VAT) collector number
7 Obtain/Verify that your location has a Building Certificate  -IMB (Ijin Mendirikan Bangunan)

Typical cost in Gianyar is Rp 500k per square metre of the PROPERTY.

Agent
8 Package Licensing System Agent 3 days
Location Permit (SITU),  300,000
Business trading license (Surat Izin Usaha Perdagangan, SIUP)  250,000
Registration certificate (Tanda Daftar Perusahaan, TDP)  100,000
9 Open a corporate bank account. Deposit the minimum capital required for your business (Rp 500 million) You
10 Unofficial administrative fee  500,000
11* Jamsostek – Workers Social Security Program Agent  – 3 days
12* Register with Ministry of manpower Agent  – 7 days
Sub-Total   7,030,000 38 days
Agent Fee Agent
Total      

 

By law, the Notaris (public notary) is the only profession with access to the new computerized system for non-tax state revenue payments which is tied to electronically registering a business name. So the Notaries have a monopoly. But they are also limited by law to a maximum fee of 1.5% of the cost of the transaction.

 

In practice, notary associations set a fee and I have no problems with paying Rp 8 million (including all the relevant registration fees) to the Notary for effectively pulling together the first stage of the process.

 

Not all Notaries are Created Equal

 

I’m sure you have your own horror stories or have heard of them; my first CV here was supposed to define my activities as business training but what came through was specifically training people for work on boat crews such as cooks and stewards. It took nearly 6 months to get over the inertia caused by the embarrassment of the notary staff to get it changed. So find yourself a Notary whose knowledge base extends past transacting land deals.

 

Agents are in Business Too

 

Agents are free to charge whatever they like. I don’t have a problem paying around 10 million for the service offered by a good agent for the time and effort it saves me, but over that, I will balk. The creation of One Stop Shops has significantly reduced workload and effort for obtaining the related documents.

 

Be Active in the Process

 

No matter how good your Agent and Notaris, they can’t perform for you if you don’t support them. Make sure you have the required documents ready to go and be available to sign documents as required. Your agent will advise you on these needs.

 

Not all Businesses are the same

 

One of the key reasons we need a business registered, apart from making a profit, is to hold our KITAS. There have been a number of agents advising people that they can get their KITAS as a Komisaris. This may be true but it rather limits your capacity to actually work, as the duties of a Komasaris are pretty much restricted to ensuring the Directors are performing properly!

 

You can just as easily be deported for performing functions that are not represented by your business card (and your business card title has to conform to your KITAS title) – as you can be for not having a KITAS at all.

 

Depending on the type of company charter you nominate it is quite possible that the titles and functions available to you might be restricted to marketing specialist, business development specialist and quality control specialist. Personally, I always nominate as quality control specialist as this allows me to do anything at all in the process of checking the quality of processes, systems, lifting weights, safety and so on.

 

Getting a Director for Your Business

 

Your local-type PT business can only be owned by Indonesians and so you need to exercise care in the choice of the person who is nominally in charge of and actually owns your business. There are steps you can take to minimize the risk involved, and it’s prudent to plan for the worst when things are going well.

 

Keep in mind that this risk management is a two-way street. If you cause major problems in non-compliance with regulatory requirements then your Director will be the one who is fined and sent to jail. In those conditions, you should not be surprised if your company director declares that either you are fired, or your position is no longer required, or worse.

 

Please share your experiences or any contrary advice.

 

Is there is any aspect of developing a successful business you would like me to write about?

 

Get it today, and sign up for your FREE 14-Day Trial now.

 



Find this article useful? Share it with others.

Leave a Reply

Please Login to comment
  Subscribe  
Notify of