Starting Jan. 1, any import shipment valued at $3 or more – far lower than the previous threshold of $75 – will have to pay tax. (Photo courtesy of Sale Duck)
Indonesia Reduces Import Tax Threshold, Makes Life Difficult for Online Shops
DECEMBER 24, 2019
Jakarta. The Customs Office has tightened the rules for e-commerce imports on Monday as part of a concerted effort to protect local small businesses producing shoes, bags and clothes.
Heru Pambudi, the director general of customs and excise at the Finance Ministry, said in a statement that any import shipment valued at $3 or more must now pay import tax – a much lower import tax-free threshold than the previous $75. The new rule will be effective starting Jan. 1 next year.
This was the second time in just over a year that the customs office had lowered the consignment value threshold. The customs reduced the limit, also known as the de minimis rule, from $100 to $75 per shipment in October last year to restrict imports.
The rise of e-commerce in Indonesia has allowed importers to exploit a leeway in the country's import regime in the past few years. Instead of buying in bulk and pay import tax as they used to, importers can now simply set up an online shop and let buyers ship in individual items and skip paying taxes entirely.
Heru said the office decided to tighten the loophole to protect local producers, especially small businesses producing bags, shoes and fashion items.
"Many of them had to close up shops as the market was being flooded by products from overseas," Heru said.
In addition, the government has also set a 15-20 percent import tax for bags, 25-30 percent for shoes and 15-25 percent for textile products, depending on the countries where the items come from.
Those taxes will be charged on top of a value-added tax of 10 percent and a deductible income tax of 7.5-10 percent, making the total taxes that need to be paid when importing significantly higher, Heru said.
Tighter import rules would create "a level playing field for local products from Cibaduyut, Cihampelas and Tajur," he said, referring to traditional production centers for shoes, bags and fashion clothing in West Java.
Heru said the government at the same time has also lowered the import tax for other products impacted by the lower threshold policy.
Items aside from shoes, bags and clothes are now charged a 7.5 percent import tax, a 10 percent value-added tax and 0 percent deductible income tax. "So, in general, the total taxes that customers need to pay [when importing] have actually fallen from 27.5-37.5 percent to just 17.5 percent," Heru said.
The Finance Ministry will also connect its customized National Single Window (NSW) system with online marketplaces to monitor transaction data, including the quantity, type and price of goods, in real time.
Heru said this will ensure transparency between e-commerce shops and the government.
"The Finance Ministry has already conducted a pilot project for this new system with Lazada, Blibli and Bukalapak," he said.