Many goods are imported into Indonesia every day. To ensure that all such imports are done in a legal and ethical manner, the government of Indonesia has instituted a variety of import laws. These laws have also played a role in increasing the economic growth of the country.
Indonesia is home to one of the world’s largest economies. The country is well-endowed with natural resources such as crude oil, copper, tin, natural gas, and gold. Thus, its per capita income and economic growth rate have been able to increase steadily. One of the other leading factors that has greatly promoted its economic growth is trade. Indonesia’s status one of the world’s largest importers has greatly contributed to the growth of its Gross Domestic Product (GDP). The growth of the country’s GDP has also been attributed to Indonesia’s efforts to integrate its economy with that of the world. This has been done through reducing international trade barriers such as non-tariff barriers (NTBs), a move that has greatly fueled foreign direct investment (FDI).
As one of the leading importers globally, Indonesia is prone to various illegal and unsafe trade practices that pose great danger not only to its economy but also its citizens. To ensure such practices do not affect the economy negatively, the government of Indonesia has created laws which have to be strictly followed by any importer in the country. There have been many laws which have been developed and restrictions which have been imposed with regard to importation activities.
The Most Important Import Laws of Indonesia
While trying to boost its economic growth, Indonesia must ensure that its importation activities do not stifle the growth. Several restrictions have to be put in place by the relevant authorities with regard to security risks and the smuggling of illegal items. As compared to other countries, Indonesia has some of the strictest laws with regard to import restrictions. Therefore, anyone who plans to import any items into Indonesia has to fulfill several requirements.
One must be in possession of a business license to be able to carry out import activities. All business licensing is facilitated by the Ministry of Trade. A Business Identity Number is also issued by the Ministry of Trade. An import license is another mandatory requirement. The import license is divided into two categories; the General Import License and the Producer Import License. An importer conducting business without either of these required licenses has broken the law and will be suitably punished.
If you are having any trouble in obtaining a valid business license in Indonesia, let us at Paul Hype Page & Co assist you. We will guide you through the process of obtaining whichever business license you might need so that you may begin your company’s business operations as soon as possible. Through our services, you can be sure that you will receive the business license you need as soon as possible and without facing any problems.
Importers are also required to provide several documents when conducting business activities. These include customs import declaration, certificate of insurance, packing list, commercial invoice duly signed by the manufacturer as authentic, and a bill of lading in the form three endorsed original copies and four non-negotiable copies. Indonesia considers it important to protect its citizens from harmful and sub-standard products. At the moment, there have not been any discussions to change the import restriction laws; thus, there is no possibility that these laws will soon be changed.
The importation of goods into Indonesia has to follow a due process which includes two major stages. The first stage includes finding a buyer within Indonesia after which both parties are required to decide on the most appropriate terms of trade. However, before this, an importer or distributor with a valid importing license must be sourced. Registering with relevant authorities is necessary before certain products can be imported. All required supporting documents must be duly completed before the importer can proceed to process them.
The clearance process is the second stage of the importation process. Once the importer has completed the necessary payments and had them approved by the relevant authorities, the clearance process begins. The Customs Declaration Form (PIB) is then submitted to the Customs Office alongside its supporting documents. The submission is done for the purposes of obtaining a Customs Clearance Approval. These supporting documents include a customs registration number (SRP), import identification number (API), proof of deposit of custom duty, tax registration number (NPWP), and authorization letter.
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.
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Import Laws of Indonesia FAQs
Most of Indonesia’s trade is conducted with other Asian countries. Of these, the majority of such trading activities is conducted with South Korea, Japan, Singapore, and China.
Indonesia’s leading exports include minerals, oil and gas, rubber, electrical appliances, and palm oil. The exports of such products account for approximately 20% of the country’s GDP.
The products of which Indonesia imports large quantities from abroad include mineral fuels, oil, machinery, computers, iron, steel, plastics, and vehicles. Items in these categories constitute almost 60% of all products which are imported into Indonesia.