Indonesia has proven itself to be a profitable market and has made serious efforts to improve its import and export procedures as the country targets to become the world’s fourth-largest economy by 2045.
The implementation of the new Omnibus Law has been touted as Indonesia’s most serious attempt at business reforms, with the implementing regulations intending to encourage investments, promote financial inclusion, and ease imports and exports.
Under Government Regulation No. 29 of 2021 (Reg 29/2021), an implementing regulation of the Omnibus Law, the Ministry of Trade (MoT) is the authority that issues approvals, verifications, obligations, and licenses on import-export activities.
Moreover, the MoT now has the authority to grant greater autonomy and ease of obtaining a business license to importers or exporters who are deemed to have a ‘good reputation’. The criteria of who qualifies as an importer or exporter with a good reputation is to be further regulated in a ministerial regulation.
Obtaining a business identification number now sufficient for import-export activities
Through Reg 29/2021, businesses will now only require a Business Identification Number (NIB) to begin their import or export activities. Obtaining a NIB can be done through the Online Single Submission (OSS) system.
Previously, businesses had to apply for one of three types of import licenses: API-U (General Import License); API-P (Producer Import License); and a Limited Import License, also known as API Terbatas (API-T). The NIB now doubles up as an API-U, API-P, and an API-T. Further, exporters also only require a NIB.
However, businesses importing certain types of goods will require an additional import license from the MoT. Depending on the company’s circumstances, this could be for:
An importer registration license;
An import approval license for producer importers (companies that import materials used in the manufacture of their own products); or
A general import approval license.
Similarly, businesses exporting certain types of goods will require an additional export license from the MoT, which could be:
An export registration license; or
An export approval license.
Importing to Indonesia
Before importing or exporting goods, businesses should check with the Indonesian Harmonization System (HS) Code, which is used to classify every category of products. This is because specific products may require additional licenses or registration.
Furthermore, the HS code is one of the factors that determine the rate of taxes and customs duties, as well as any specific import/export requirements for that product.
Choosing a freight forwarder
When importing goods from abroad, it is important to choose a professional freight forwarder. Freight forwarders handle all the logistical needs as well as assist in managing and fulfilling customs clearance requirements.
Businesses importing into Indonesia must provide the following documents:
Commercial invoice, signed by the manufacturer or supplier as true and correct;
Bill of lading, in three endorsed originals and four non-negotiable copies;
Certificate of insurance;
Packing list;
NIB/import permit; and
Customs import declaration.
Import tariff and taxes
Customs duties in Indonesia vary from 0 to 170 percent, with most imported items attracting duties in the range of 0 to 15 percent. The amount of duty depends on the type of goods imported, based on the product’s HS code.
It is required to pre-pay customs duties and import taxes and provide notification of the incoming freight to customs.
An import sales tax is imposed on imports at the point of entry (except for those goods considered essential by the government) at rates within the range of five and 30 percent.
Further, Indonesia is committed to the ASEAN Free Trade Agreement within which duties on imports from the member countries generally range from zero to five percent, except for products specified on exclusion lists.
Exporting goods from Indonesia
The export process usually begins with a sales contract process between the exporters and importers through which the payment can be made via the letter of credit (L/C) or non-L/C methods.
Legal entity required
Only Indonesian incorporated legal entities can export goods from Indonesia. These can be limited liability companies, public company, or a cooperative.
Businesses exporting out of Indonesia must provide the following documents:
Bill of Lading, Airway bill or other transport documents such as a postal receipt, cargo receipt;
Commercial Invoice;
Customs Export Declaration;
Packing List;
Export declaration of goods (PEB);
Insurance Certificate;
Export Permit; and
Certificate of Origin.
Export tariff and taxes
Exporters are exempted from export duties, VAT, and tax on luxury products for materials and intermediate products used in manufacturing goods produced from export. However, exports of certain items such as untreated skin, tanned leather, and coal attract export duties of 25 percent, 15 percent, and five percent, respectively.
Disclaimer
This article is originally written by Dezan Shira & Associates and published by ASEAN Briefing.
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax, HR, technology and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, DSA’s mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. With more than 25 years of on-the-ground experience and a large team of lawyers, tax experts and auditors, in addition to researchers and business analysts, DSA is your partner for growth in Asia.
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