Indonesia is one of the most populous countries in the world. That factor, combined with its geographical location on the world map makes it a key trading partner for many countries located around it. It shares land borders with Papa New Guinea, Timor Leste, and Malaysia. India, Singapore, the Philippines, and Thailand are also located close to it.
How to register as an importer in Indonesia?
In order to legally register your business in Indonesia, you will need to register with the Indonesian Trade Department. You will not only need to obtain a Customs Identification Number (NIK) but also require an Importer Identification Number(API). It is not legal to import items without first obtaining the API.
Indonesian authorities currently offer three types of import licenses:
- General Import License(API-U)
- Producer Import License(API-P)
- Limited Import License(API-T)
Each of the above licenses is restricted to specific categories and industries. To be able to legally import a certain product, you will have to ensure you have the correct license.
Let’s take a look at these import licenses in more detail.
General Import License(API-U)
This kind of license is for general trading companies that import ready to sell products that are then distributed and sold inside the country. If you are trading finished products, this is the license you will need.
Producer Import License(API-P)
Importers of raw materials or goods that either support manufacturing inside Indonesia or are directly employed in manufacturing processes in the country will need to obtain the API-P. Note that this license does not automatically allow you to sell or distribute the products that will eventually be produced using these raw materials. The time-frame to obtain this license is usually thirty days.
Limited Import License(API-T)
You will need to go to the BKPM (Indonesian Investment Coordinating Board) to get this license. One advantage of this license is that it makes you eligible for a 2.5% withholding tax as opposed to the usual 7.5%.
Traders need to give due consideration to the type of license they intend to obtain. If you intend to sell the imported products, then, of course, the API-U is the license you need to obtain. On the other hand, if you intend to use those imported products for manufacturing, then the API-P is what you need. In addition to that, you will have to get the TDP (Industrial Registered License) and the IUI (Industrial License).
In case you decide to obtain the API-P and the further licenses, it will effectively turn your business into a manufacturing business as you then won’t be allowed to import products for the purpose of distribution and sale.
If you want to do both import to re-sale trading and import for manufacturing simultaneously, you will have to set up another company and basically run two companies at the same time.
Documents required for importers
Any registered business that imports goods into the country must have the below-listed documents available:
- Bill of Landing
- Insurance Certificate
- Import Declaration
- Import permit
- Packing List
- Signed Invoice
It is the responsibility of the importer to ensure documents are prepared in the correct manner. Some products like narcotics, pornographic materials, political materials, firearms and ammunition are either outright banned from import or require a special permit to be imported. The importer will need to be familiar with the local laws and regulations to determine which documents are required for what kinds of products. Failure to prepare the right documents can result in lengthy delays that cost money and time. Traders should also be sure to be familiar with all shipping documents as Customs may request to inspect these if the shipment is flagged for an inspection.
Taxes and Tariffs
Indonesia uses the Harmonized Commodity Description and Coding System for the classification of imports. This system is used to determine the proper HS classification for imported goods so that taxes and tariffs can be applied accordingly.
Import taxes and import tariffs
The Customs duties that you will have to pay on your shipment can vary from 0%- 40%. As mentioned above, in order to determine how much customs duty you have to pay on your specific product, you will have to know its HS code.
In addition to other taxes, importers must pay 10% of Value Added Tax on imports into Indonesia.
Free Trade Zones
There are certain zones that are free from from the payment of import taxes. These include specific free trade locations in the following areas:
- Batam Island
- And others.
Free Trade Agreements (FTAs)
As a consequence of its ASEAN membership, Indonesia has trade deals with the following countries:
In addition to the above, Indonesia and Japan have also signed a bilateral free trade agreement. These trade agreements allow for importers to enjoy preferential import duty rates when trading with member parties.
As the fourth largest country by population in the world, Indonesia is a big market. Add to that the fact that it is a developing country and an emerging economy – it makes for a trading market with massive potential. Its collaboration with other ASEAN nations is only going to help it reach other economies more efficiently. However, any trader looking to set up a business in Indonesia needs to carefully consider the local rules and regulations that apply to his/her business. Traders should be aware that Indonesia Customs authorities are generally strict and enforce regulations through inspections and audits. The best way to avoid any long term issues is to hire local help. Experts that have been working in the region usually know how to get things done efficiently and will save you a lot of hassle in the long run.