Licenses Which Are Needed to Import Restricted Items into Indonesia
In 2015, the Indonesian Ministry of Trade (MOT) introduced Regulation 118/2015 which declared an Import Identification Number (API) to be a mandatory requirement for importers. The API provides key information on importers and their activities. For companies intending to import restricted goods, two types of API licenses are required: a General Import License (API-U) and a Producer Import License (API-P).
The API-U grants Indonesian companies the permission to import goods for general trading purposes. In the recent past, this license only allowed holder companies to import only one category of goods specified by the trade regulations of Indonesia. However, several amendments changed the specifications of the license to allow holder companies to import various categories of goods. The amendments also did away with the need for API-U holder companies to establish special relationships with overseas suppliers.
The API-P allows companies to import goods to be utilized internally by themselves. These goods include capital goods, raw materials, and other complementary materials for further processing or to support operational and production activities. However, an API-P cannot be transferred or sold to third-party companies unless either of two exceptions apply. One is that holder companies must produce proof of the goods’ use for their own purposes for a two-year minimum after the import date. The other is that the transfer of the imported goods be made through an import duty exemption facility. Another important license for importing restricted items into Indonesia is NPIK, a special importer identification number. It is mandatory for importing items such as electronics and their components, toys, textiles and textile products, soybeans, sugar, rice, and corn.
Cost of Importing Items into Indonesia
The cost of importing any item into Indonesia depends on the type of item to be imported. For any imports in Indonesia, three major taxes are imposed. These are value-added tax (VAT) which is currently at 10%, income tax which is imposed on specific items at a rate of 2.5%, and import duties ranging between 0% and 450%. Luxury tax is also imposed on goods such as branded shoes, luxury motorcycles, alcoholic beverages, yachts, and luxury cars.
To calculate the total value of import tax, several steps apply. First, the total value of goods is determined in Indonesian rupiah. This is achieved through summing in US dollars the goods’ total value to the CIF (the sum of freight cost, insurance, and freight on board), after which it is multiplied by the exchange rate.
To establish the total value of import tax and duty, taxes such as income tax, Value Added Tax (VAT), and import duty have to be included. Import duty is derived by establishing the total value of goods in Indonesian rupiah, then multiplying this figure by the import duty percentage. To determine the value of VAT, the sum of import duty and the total value of goods in Indonesian rupiah is multiplied by 10%. Income tax is calculated by summing the total value of imports in Indonesian rupiah and import duty; this figure is then multiplied by the corresponding income tax percentage. To be able to receive a permit to import goods into Indonesia, companies and individuals must fully comply to the taxes and charges imposed. Those who are not compliant will suffer legal consequences.
As an aside, if you happen to be facing any difficulties with the management of your taxation matters in Indonesia, we at Paul Hype Page & Co are always willing to provide our assistance. We will ensure that you and your business are always compliant with the tax laws of Indonesia. We will also work with you in order to ensure that your tax burden is reduced in a way which is both legal and feasible.
In spite of the relatively high import costs in Indonesia, compliance is mandatory. The import costs are one of the revenue generators for the country which has fueled its economic growth. The costs are also meant to discourage the promoters of illicit trade because the payment of all the costs leads to great loss on their part.
How Those Who Violate Indonesia’s Import Laws Are Punished
Despite the enforcement of laws on the importation of certain products, many cases of violations of such laws have been reported. However, Indonesian laws are very clear on the punishments to be imposed in such cases. Anyone found to be in violation the laws is subject to a fine, a jail term, or both. In certain severe cases of violation, the importers’ licenses may be revoked and completely banned from being involved in such business activities again. The strict laws have also helped in promoting the use of locally manufactured goods thus leading to Indonesia’s steady economic growth.
For the sake of the country’s general well-being, Indonesia has had to put in place stringent measures that will ensure its citizens are protected from unsafe trade practices brought about by the illegal importation of goods into the country. This is one of the reasons for its restrictions on the importation of certain commodities. The Ministry of Trade also has to create guidelines that govern import procedures to ensure accountability and fair practice. Violators of the import laws must also be held accountable and subjected to the full consequences of their actions in order to help in creating a conducive business environment for all law-abiding business owners in Indonesia.