Doing Business in Bali

Do you want to expand your business into Bali or hire employees there? Find out the key things you need to know about Indonesian expansion below.

Bali Economy Overview

Currency

Indonesian Rupiah (IDR)

Working hours

40 hours/week

Public/bank holidays

17 public holidays

Capital

Denpasar

Languages

Bahasa Indonesia, Basa Bali, English

Population

1,075,000

Minimum hourly salary

IDR 17,585

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Bali’s labor market laws require that workers be classified correctly. Employers who misclassify employees as independent contractors can face penalties, including back payment of taxes and possible fines.

Fun fact

Tourism contributes about 80% of Bali’s economy, making it one of the most tourism-dependent regions in the world.

Bali is an island province in Indonesia that has become an attractive destination for foreign investors. Its government policies favor international businesses and have opened Indonesia to Foreign Direct Investment (FDI). According to Bank Indonesia, Bali received USD 710.2 million in FDI in the first half of 2024. This influx indicates a strong and increasing interest in Bali’s economic environment, especially in industries like real estate, hotels, and wellness.

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Overview of Bali's Economy

Bali’s economy has traditionally been driven by tourism, which generates a major portion of Bali’s GDP and is a primary source of employment. However, the COVID-19 pandemic in 2020 affected this industry as people could not travel. The pandemic significantly reduced Bali’s foreign visitor count to 51 in 2021 from over five million annual visits, causing severe problems for the local hospitality, retail, and other related businesses.

Despite these losses, Bali’s economy has gradually recovered. With the restoration of international travel, the island has seen a rise in tourism. Tourist arrivals climbed steadily in 2023, allowing the hotel, restaurant, and transportation sectors to regain their footing. This revival has been critical for local employment, with many firms reopening, helping Bali’s economic recovery.

Key Economic Element	Impact
Tourism	Major contributor to GDP and employment; supports local businesses but vulnerable to external shocks (e.g., pandemics).
Agriculture	Provides reliable income for rural communities; promotes food security and local sustainability.
Hospitality and Retail	Directly linked to tourism; creates jobs and drives consumer spending in local economies.
Construction	Stimulates economic growth through infrastructure development; creates jobs and enhances public services.
Eco-tourism	Attracts environmentally conscious travelers; promotes conservation and sustainable practices while supporting local communities.
Transportation	Facilitates tourism and trade; essential for logistics and mobility, impacting local business operations.
Creative Industries	Enhances cultural heritage and identity; provides income for local artisans and contributes to tourism appeal.
Government Initiatives	Policies aimed at sustainable development and diversification reduce vulnerability and promote long-term economic stability.

Agriculture is also important to Bali’s economy, particularly the production of rice, coffee, and spices. While agriculture contributes less to the island’s GDP than tourism, it remains a reliable source of income for locals, particularly in rural areas. To reduce over-dependence on mass tourism, its government has put in place important strategies such as promoting agricultural diversification and eco-tourism, putting a stop to the building of villas, hotels, and nightclubs, and introducing a tourism tax.

Still, Bali faces economic issues such as inflation and a high cost of living, which affect local citizens. The region also faces environmental challenges, such as waste management and the viability of its tourism-dependent economy, which the government is tackling through new legislation aimed at sustainable tourism practices and environmental protection.

Taxes

Employer tax: 10%

Adds up to approximately 10%, covering:

Old Age Security (Jaminan Hari Tua or JHT): Employers contribute 3.7% of the employee’s salary.
Pension (Jaminan Pensiun or JP): Employers contribute 2% of the employee’s salary.
Work Accident Insurance (Jaminan Kecelakaan Kerja or JKK): Contribution rates range from 0.24% to 1.74%, depending on the level of risk associated with the job.
Death Insurance (Jaminan Kematian or JKM): Employers contribute 0.3% of the employee’s salary.
Health Insurance (Jaminan Kesehatan or JKN): Employers contribute 4% of the employee’s salary.

Employee tax: 5-35%

Income tax

Bali has progressive income tax from 5-35% depending on the employee’s salary.

Overview of Business Regulation In Bali

As a part of Indonesia, Bali is governed by strict laws that are intended to protect consumers and companies, and promote a competitive economy. With certain regional modifications in Bali to accommodate its unique economic focus, which is mostly driven by tourism and international investors, Indonesian law is applicable throughout the country.

Consumer Protection

The Consumer Protection Law (Law No. 8 of 1999), Indonesia’s main consumer protection law, contains extensive regulations against unfair commercial activities, such as deceptive advertising, misrepresented products, and inadequate labeling. Additionally, this regulation requires open communication regarding price and commercial partnerships, which is essential in Bali’s diverse marketplace. Additionally, local government agencies or the National Consumer Protection Agency (BPKN) can receive consumer complaints and enforce remedies and fines for infractions.

Antitrust Regulations

Under Indonesia’s Antitrust Law (Law No. 5 of 1999), which is supervised by the Indonesia Competition Commission (KPPU), monopolistic acts and unhealthy corporate competition are prohibited. These rules prevent cartels, market manipulation, and mergers that could stifle competition or establish monopolies. The law supports fair play among businesses in Bali’s retail, real estate, and hospitality sectors by restricting any agreements or activities that lessen market competition.

Financial Regulations

To further protect customers, Bali also complies with national banking and interest rate laws, which include firm rules for financial transactions. Financial Services Authority (OJK) keeps an eye on and controls financial activities. OJK has put in place particular regulations and punishments to stop fraud, pyramid schemes, and other illegal financial activities, safeguarding both domestic and international customers in Bali’s financial system.

The Ministry of Trade, local government agencies, and KPPU are normally in charge of enforcing these rules, with OJK providing further assistance in financial situations. Bali also works with local consumer rights groups to promote direct consumer involvement and increase awareness of ethical corporate practices.

Benefits of Doing Business in Bali

Bali provides several advantages for international businesses looking to expand in Southeast Asia.

As part of Indonesia (the largest economy in Southeast Asia), it offers a stable legal and regulatory framework, which can benefit foreign firms. Indonesia’s legal system is a mix of civil law, customary law, and Islamic law.

Furthermore, the Indonesian government has tried to simplify corporate operations, particularly through measures such as the Omnibus Law, which reduces the cost of complying with business laws, reduces the formal, strenuous procedures associated with these laws, and protects foreign investors’ property and contract rights.

Additionally, Bali provides favorable tax conditions for certain types of firms, particularly those in the tourism and hospitality sectors. Bali-based firms can take advantage of tax breaks and incentives offered by the Indonesian government, such as lower corporate tax rates for small and medium-sized businesses and particular benefits for eco-friendly and sustainable tourism operations. These incentives might be beneficial for businesses that want to capitalize on Bali’s flourishing tourism industry, such as hotel chains, tour operators, and health and wellness organizations.

The island has attracted more foreign investment, particularly in industries like technology, real estate, and hotels, resulting in a competent and diverse personnel pool. The Indonesian government also aims to reduce limitations on foreign ownership and streamline licensing processes, making Bali a desirable, accessible destination for both startups and established firms.

Downsides of Doing Business in Bali

Despite the benefits of doing business in this region, foreign businesses may face challenges in Bali’s regulatory environment.

Navigating local rules, such as land ownership limits and complex business license requirements, can be challenging. For example, because foreign ownership of land is restricted, businesses must manage leasehold agreements, which can increase legal complexities and costs.

Additionally, certain industries in Bali have regulatory restrictions for international companies. The Negative Investment List, which Indonesia has, restricts foreign investment in some sectors. For instance, regulations are limiting small retail and specific tourism services, which can be a problem for companies looking to run completely independent operations in these sectors.

Another significant challenge is infrastructure problems. Despite being a popular travel destination, Bali’s infrastructural amenities are poor. For companies that depend on a steady, dependable infrastructure, problems like traffic jams, poor internet performance, and power outages may interfere with daily operations, creating logistical difficulties and sometimes compromising service delivery.

Furthermore, since its primary focus is on tourism, the island is economically susceptible to global financial. This was demonstrated during the COVID-19 epidemic when a sharp decline in foreign visitors resulted in significant losses for numerous businesses.

International Expansion into Bali

Businesses interested in expanding internationally into Bali could look into several strategies to get established in the Indonesian market. Here are a few typical strategies:

Bali Employer of Record (EOR)

An Employer of Record (EOR) arrangement provides a more comprehensive alternative for businesses to hire staff in Bali without creating a formal corporation. As the legal employer, the EOR takes on all employment duties, such as complying with Indonesian labor laws, withholding taxes, and fulfilling regulatory requirements.

This method offers flexibility and speed, making it suitable for businesses looking to expand their workforce in Bali with little risk or administrative strain. For businesses seeking to explore the Bali market before committing to a full expansion, EORs are a good option.

Learn more about EOR in Bali

Recruitment Agencies

Recruitment agencies in Bali help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Balinese labor laws.

For businesses looking to grow in Bali, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

Learn more about Recruitment Agencies in Bali

Professional Employer Organization (PEO)

Using a Professional Employer Organization (PEO) enables businesses to hire employees in Bali without establishing a legal corporation or branch. A PEO functions as the employer for administrative purposes, including payroll, tax compliance, and benefits under Indonesian labor regulations.

This agreement allows companies to quickly access the market, test operations, and assess talent, making it a popular option for those hoping to determine their prospects in Bali. PEOs provide flexibility and cost savings while complying with local employment rules.

Learn more about PEO in Bali

Subsidiary Incorporation

In Bali, incorporating a subsidiary means creating an independent legal entity that is under the parent company’s authority yet separate from it. Foreign-owned businesses, (PT PMA), are subject to local ownership and legal requirements under Indonesia’s Foreign Investment Law.

Establishing a subsidiary provides parent companies with increased operational control, a high degree of legal and tax independence, and liability protection. Businesses looking to establish a long-term presence in Bali will benefit most from this strategy, which enables them to completely settle into the local market and regulatory framework.

Branch Office

Businesses can operate in Bali without creating an independent legal organization by registering a branch. Compared to a subsidiary, a branch is subject to fewer setup requirements and functions as an extension of the parent firm. However, this registration limits the branch’s operations to those permitted by Indonesian law and requires approval from the Indonesian Investment Coordinating Board (BKPM). For businesses looking to perform limited operations in Bali or study the market without making major long-term investments, this approach is ideal.

Business Opportunities in Bali

Foreign investors have a lot of economic opportunities in Indonesia, especially in industries that complement Bali’s booming tourism sector. Bali offers an appealing environment for development and expansion because of its accommodating laws for foreign investment, and rapidly expanding infrastructure. For success, investors need to remain aware of the local way of life, the legal environment, and sustainability practices.

There is a growing demand for diverse services and products that cater to both tourists and locals. The tourism industry remains a significant focus, with opportunities for eco-friendly accommodations, wellness retreats, and adventure tourism activities that align with the increasing consumer preference for sustainable travel experiences. Additionally, the agricultural sector presents avenues for organic farming and local food production, capitalizing on the island’s rich agricultural resources. The construction industry continues to thrive, fueled by ongoing infrastructure projects and the need for modern amenities.

Business Opportunity	Reason for Opportunity
Eco-Tourism	Growing interest in sustainable travel experiences attracts environmentally conscious tourists.
Wellness and Spa Services	Increased demand for health and wellness experiences, including yoga retreats and holistic therapies.
Organic Agriculture	Rising consumer preference for organic and locally sourced food products supports sustainable farming initiatives.
Adventure Tourism	Opportunities for outdoor activities such as hiking, diving, and cultural tours appeal to adventure-seeking travelers.
Construction and Real Estate	Ongoing infrastructure development and housing demand create investment opportunities in construction and real estate.
Digital Services	The rise of remote work and digital nomadism opens avenues for tech and digital marketing services.
Local Handicrafts and Art	Growing interest in unique, locally made products provides opportunities for artisans and craftspeople.

These business opportunities are underscored by Bali’s strategic location as a tourist destination and its commitment to sustainable development. Entrepreneurs looking to invest in Bali can tap into these emerging sectors, contributing to the island’s economic recovery while building successful ventures that resonate with both residents and visitors.

Are you interested in doing business in Bali? Remote People can help.