Setting Up an Accommodation Business in Bali
Accommodation business in Bali – Is it a viable business option?
A thought that undoubtedly crosses every Bali tourist’s mind, is how to stay on this beautiful island longer. Many people look into ways of making a living by setting up a viable business, such as an accommodation business in Bali. Indonesian legislation has its own peculiarities, which can sometimes make matters complicated for foreign investors looking to invest in guests houses, hotels and resorts.
First and foremost is to consider where your land will be, how many rooms are necessary, the land size, the percentage of land that can be utilized, and what type of accommodation business to setup in Bali. Will it be a bed and breakfast type setup, a small hotel, or a full fledged resort with facilities. Many districts around Bali have varied zoning laws and local regulations, especially in areas such as South Bali (Kuta, Seminyak, Denpasar, Sanur and Gianyar regency) which has heavy population density and various restrictions for accommodation businesses are in place. Therefore it is important to verify local zoning laws and corporate laws with local authorities and the Foreign Investment board before any land transactions are made.
Pondok Wisata – Indonesian sole entrepreneur
A bed and breakfast with less than 5 rooms is only open to sole Indonesian proprietorship. Many foreigners own a bed and breakfast through nominee arrangements. It is important to understand that a foreigner will not be able to legally own nor legally work with this type of setup.
The next two structures, a Hotel Melati and 3 Star Hotel and up, are open to foreign investment.
A foreign investment company, or PMA requires a minimum of two shareholders.
The maximum foreign shares allowed depends on the classification of the company. Indonesian regulation determines the maximum foreign investment as well as the minimum capital that a foreigner must invest in the creation of a business in Bali. This is established according to the sector of activity.
Hotel Melati – Non starred hotel
A small non-starred hotel, would require you to have an Indonesian shareholder with a minimum of 33% shares, and you may hold the majority of shares. Your main interlocutor will be the Investment Coordinating Board (BKPM) because it will provide you the necessary license for setting up a company in Bali. It will be only with this license that you can begin the creation of your society. This authorization has a validity of three years.
Hotel Berbintang – 3, 4 & 5 Star Hotels
A 3 star hotel would need approximately 25 rooms and more, and requires standard hotel facilities such as swimming pool, business center, restaurant, wheel chair access to name a few. A 3 starred hotel can be 100% owned by a foreigner or a foreign entity.
A 3 starred hotel should have a principal license, company act, legalization by the ministry of domicile certificate, Tax ID code Number, Manpower report, and Business certification (new).
For the restaurant, an alcohol license can be obtained, and in addition there are licenses such as hygienic license, environement licenses to name a few.
Do not neglect the tedious parts of zoning checks on your land, and a proper due diligence to ensure the legalities are in check, the legal consultants of CCI are here for assist you in the creation of your business in Bali, safely and legally.
Whatever your choice, the creation of a PMA needs an agreement provided by the Indonesian government. This process can take several months and you have to be advised by professionals.
Note: Three regions are currently prohibited for any further developments of new hotels and villas: Badung, Denpasar and Gianyar.
Important: Regulations in Indonesia change frequently.
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Image Source : Villa Kampung Kecil.
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