Bali Tightens Rules for Foreign Businesses: What Investors Should Prepare For
Serious discussions have begun in Bali regarding a revision of the operating conditions for foreign-owned companies. The provincial authorities have submitted a proposal to the Ministry of Investment to restrict access for PT PMA (Perseroan Terbatas Penanaman Modal Asing) to a number of business sectors that are currently widely used by expatriates. If the initiative is approved, Bali will become the first region in Indonesia where certain business activities are formally closed to foreign capital.
Behind the discussion of potential prohibitions lies a broader restructuring of Indonesia’s investment policy — and it will affect far more than motorbike rentals or villa leasing.
What Is Driving the Reform
Bali currently ranks among the leading regions in Indonesia in terms of the number of companies with foreign participation: approximately 22.5% of all registered entities. However, only around 1.6% of these companies actually invest capital and implement their declared projects. The remainder are “shell” entities or companies existing solely on paper. This imbalance has become the starting point for tightening regulatory control.
The overall direction of the policy shift is clear:
Strengthening requirements for genuine investment realization;
Reducing tolerance toward nominal PT PMA structures;
Focusing on capital-intensive projects;
Increasing inspections and administrative oversight.
Formally, the government frames the initiative as a matter of improving the “quality of investment.” In practice, the core objective is to combat fictitious structures and nominee arrangements.
This week, a Legal Indonesia specialist participated in a clarification program at BKPM (Badan Koordinasi Penanaman Modal) — the central authority overseeing investment and licensing. According to her account, the tone of the meeting was unequivocal:
“The primary focus is now on companies that are formally registered but do not conduct actual business activities. This particularly concerns PT PMA entities operating through virtual offices and declaring investments below the established minimum threshold of IDR 10 billion per KBLI. Such structures are under heightened scrutiny.”
Oversight is initiated at the Jakarta level, with Bali viewed as the region with the highest concentration of such entities.
Why Bali Is a Special Case
Bali remains one of Indonesia’s most attractive regions for foreign investment, particularly in tourism and real estate. In the previous year, realized investment on the island exceeded IDR 40 trillion. The majority of capital is concentrated in southern districts — Denpasar, Badung, Gianyar, and Tabanan — with a significant share allocated to real estate and tourism-related services.
It is precisely in these areas that nominee arrangements, capital fragmentation, and project-based registrations without actual implementation have been most prevalent.
Regulatory enforcement is now systemic. Authorities are verifying not only the existence of licenses in the OSS (Online Single Submission) system, but also the factual accuracy of declared information: capital structure, business address, and actual investment realization.
KBLI Codes Potentially Subject to Restriction
During the meeting, direct intentions were expressed to restrict or fully close certain KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) codes that are popular among foreign investors in Bali. Although official timelines have not yet been announced, some restrictions may take effect no later than June 2026.
The high-risk categories include:
Real Estate
KBLI 68111 — Real estate activities (already being phased out for new registrations);
KBLI 68200 — expected to be revised and renumbered (anticipated transition to 68299).
Consulting and General Service Codes
KBLI 70209 — Business consulting and management services.
Retail Trade
Various retail segments.
Vehicle Rental
Motorcycles and automobiles.
Special attention is being directed toward small-scale businesses: fast-food outlets, car washes, video production services, repair workshops, and similar activities traditionally classified as micro or small enterprises. Such projects do not align with the investment threshold of IDR 10 billion per KBLI and therefore face a high probability of being closed to PT PMA structures.
If the restrictions are approved, the OSS system will cease registering new licenses under these codes for foreign-owned companies in Bali.
Real Estate: Regulatory Changes and New Restrictions
KBLI 68111 is effectively being removed from circulation for new registrations, with formal confirmation expected before June 2026.
For existing PT PMA entities, the code may remain valid, provided no corporate amendments are made. Any changes — including address changes, share transfers, or changes of directors or shareholders — will trigger the requirement to replace this business activity code.
Moreover, the substantive interpretation of activities under 68111 is changing. The code will be treated strictly as a developer activity, limited to:
Construction of residential units (through a licensed contractor), and/or
Subsequent sale of completed units.
Short-term or long-term rental, as well as property management under this code, will no longer be permitted.
Activation of this code will also require:
KKPR (Kesesuaian Kegiatan Pemanfaatan Ruang) — zoning compliance confirmation;
Environmental approval (UKL-UPL or AMDAL, depending on project scale);
PBG (Persetujuan Bangunan Gedung) — building approval;
SLF (Sertifikat Laik Fungsi) — certificate of functional feasibility.
KBLI 68200 (Property Management) is likewise being revised. Even under current rules, this code does not authorize commercial leasing; it applies primarily to property servicing rather than income-generating rental operations.
In practice, at present the only fully compliant structure allowing a PT PMA to engage in property leasing is registration as a hotel business with a minimum two-star classification.
Primary and Secondary KBLI
Indonesian legislation does not formally distinguish between “primary” and “secondary” KBLI codes; however, in OSS practice such differentiation exists.
A primary KBLI:
Reflects the core business model;
Serves as the basis for licensing and permitting;
Defines the investment logic of the project.
Secondary KBLI codes may be added for ancillary activities — marketing, consulting, or support services. However, they must not become independent revenue-generating activities unless formally designated as primary. This distinction becomes critical during inspections.
Nominee Structures and “Shell” Companies
Companies operating through nominee local representatives were explicitly discussed during the meeting. In such arrangements, the business is formally structured as an Indonesian company, while effective control and financing are provided by foreign investors.
BKPM representatives stated directly that such schemes are known, monitored, and will be subject to strict enforcement measures.
Fictitious PT PMA entities registered “in reserve” or for hypothetical future projects are also under continuous monitoring.
According to information shared at the meeting, a database is currently being compiled of companies whose declared metrics do not meet regulatory requirements. Potential consequences include official warnings, suspension of licenses, and, in certain cases, referral of investor information to immigration authorities. This is not a theoretical scenario — it is an ongoing enforcement process.
Virtual Offices: A Strict Position
The government’s position on virtual offices was stated clearly.
A company that has commenced operational activity must maintain a real office with a physical, verifiable address. A virtual office may be used solely as a mailing address, but not as the actual place of business operations.
In 2026, joint inspections by BKPM and the statistics department are planned, including on-site address verifications.
Minimum Investment Requirements and PT PMA Risks
Considerable confusion surrounds the investment requirements, so it is important to distinguish between several frequently conflated concepts.
For PT PMA entities, the requirement remains: a minimum investment value of IDR 10 billion per declared KBLI.
This does not mean that IDR 10 billion must be deposited at the time of registration. Rather, it reflects the scale of the declared investment model: the state expects the business activity to correspond to a substantial project rather than a small enterprise.
The minimum paid-up capital requirement of IDR 2.5 billion is a technical prerequisite for PT PMA registration. It does not replace the IDR 10 billion investment requirement.
Jangka Waktu Pakai Operational (Operational Commencement Period) refers to the timeframe within which the company must initiate actual business operations after obtaining its license. During this period, it is critical to demonstrate genuine business activity: expenses, contracts, transactions, a physical location, and a functioning business model — confirming that the enterprise exists beyond formal registration.
What This Means for Entrepreneurs
This development does not represent a blanket prohibition on doing business in Bali. Rather, it marks a transition to stricter compliance verification.
Registration of a company and obtaining an NIB (Nomor Induk Berusaha) is no longer sufficient. During inspections, authorities examine actual business activity: physical office presence, employees, contracts, cash flow, and alignment between declared KBLI codes and the real business model.
Registering “for the future” or adding codes without a corresponding investment foundation has become a significant risk factor.
Waiting for formal confirmation of restrictions is not advisable. Given that enforcement is being centralized at the Jakarta level, a reactive approach may prove too late.
Conclusion
The evolving situation around KBLI and foreign-owned businesses in Bali is not a narrow ban on motorbike or villa rentals. It is a broader reform aimed at cleansing the market of fictitious structures and aligning investment activities with statutory requirements.
In 2026, the advantage will lie not with those who registered first, but with those who structured their businesses correctly from the outset.
If you currently operate a PT PMA or are planning market entry in Bali, a proactive risk assessment and compliance review under current regulatory standards is strongly recommended. Under present conditions, this is no longer precautionary — it is essential.
