With its diverse and burgeoning market, Indonesia presents many opportunities for entrepreneurs and businesses looking to import goods. However, navigating the complexities of Indonesian import regulations can be daunting for newcomers.
This guide will walk you through the Indonesian import taxes, goods restrictions, regulations and procedures.
Import Duties, Taxes and Tariffs in Indonesia
Indonesia has specific import duties, taxes and customs regulations (goes to Bahasa page) that apply to imported goods. Here’s a breakdown of the critical components of the import taxes and customs regulations in Indonesia:
- Import Duty: A flat rate of 7.5% is applied to the value of the goods.
- Value-Added Tax (VAT): A 10% VAT is applied to the total value of the imported goods.
- Income Tax: The income tax rate depends on your Indonesian Tax ID. If you have a Tax ID, the income tax is 10%. If you don’t have an Indonesian Tax ID, the income tax is 20%.
- Goods Worth Over USD 1,500: If the value of the shipment exceeds USD 1,500, regular import taxes are applied based on the product’s Harmonized System (HS) Code. The specific tax rates for different products will vary, and you would need to refer to the HS Code and the Indonesian customs authorities for the exact rates.
Goods that Are Subject to Import Restrictions and Duties in Indonesia
Not all imported goods are subject to the same import duties. Some items may be eligible for exemptions, reduced rates, or preferential treatment under various trade agreements.
It’s essential to understand the product categories that are often subject to customs regulations:
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Import Restrictions in Indonesia
Indonesia restricts and prohibits the import of certain goods, such as:
Prohibited Items
- Narcotic drugs and psychotropic substances
- Pornographic and obscene material
- Counterfeit and pirated goods and goods infringing any of the legally enforceable intellectual property rights.
- Antiquities
- Aero models (such as remote-controlled toy helicopters) operate on high radio bandwidths because of their possible interference with the communication networks of security agencies.
- Indonesia coins, which the Antique and Art Treasure Act of 1972 covers.
- Maps and literature where Indonesia’s external boundaries have been shown incorrectly because of the Government of Indonesia.
- Chemicals mentioned in Schedule 1 to the Chemical Weapons Convention of U.N. 1993.
- Wildlife products include human skeletons, specified sea shells, beef, grease, fat/oil of animal origin, exotic birds except for a few specified ones, wild animals, their parts and products, and defined live birds and animals.
Restricted Items
- Firearms and ammunition
- Live birds and animals, including pets
- Plants and their produce, e.g. fruits, seeds
- Endangered species of plants and animals, whether live or dead.
- Any goods for commercial purpose: for profit, gain or commercial usage.
- Radio transmitters are not approved for regular usage.
- Gold and Silver, other than ornaments (for import only)
- Currency over prescribed limits
- Telephone and telephony equipment of restricted frequencies
- Medicines and drugs
- Certain Animals – Camel, Horses, Cattle
- Semi-processed hides and skins
- Silkworms, silkworm seeds and cocoons
- Family Planning Devices (NOC from Ministry of Health Required)
- Vintage products, replicas of antiques or weapons
- Sand and soil
- Whole human blood plasma and certain products derived from human blood
- Sandalwood (except handicraft products & oil)
Dutiable Goods
Certain items, such as books, laptops, and electronic devices, can be brought in without incurring import duties. However, for different categories of goods like luxury cars (subject to a 150%-200% tax), alcoholic beverages (with tariffs ranging from 5% to 20%), and branded shoes (levied at 40%), additional charges may apply in addition to the CIF.
Exempt or Reduced Rate Goods
In taxation and import control, a specific category of goods enjoys special status, either being exempt from certain taxes or subject to reduced rates. This category includes:
- Ethyl Alcohol (Ethanol): This versatile chemical is used in many things. It gets special tax treatment because it’s essential for the economy.
- Alcoholic Drinks: Drinks with alcohol like wine, beer, and spirits have their taxes. These taxes are designed to encourage responsible drinking and generate revenue.
- Tobacco Products: Tobacco, like cigarettes and cigars, has special taxes, too. These taxes aim to reduce tobacco use and raise money for public health.
How to Calculate Indonesia Import Duties and Taxes
To calculate the import duties on your goods, follow these steps:
Determine the Harmonized System (H.S.) Code
Each product is classified under a specific H.S. code, which helps determine the applicable import duties. You can find the H.S. code for your product by referring to the Indonesia Customs Tariff.
Calculate Import Duty
To determine the overall import tax, you should begin by converting the aggregate value of the goods into Indonesian Rupiah. This conversion can be accomplished by utilising the subsequent formula:
TOTAL VALUE IN IDR = (Total Value in USD + Total CIF*) multiplied by the IDR exchange rate
*CIF = (Freight on Board + Insurance + Freight Cost) multiplied by the exchange rate
Now, let’s break down the calculation of Import Duty and Import Taxes:
- Import Duty:
Calculate the Import Duty as follows:
Import Duty = Customs Duty Tariff x CIF Value
- Value Added Tax (VAT):
VAT is calculated at a rate of 10% on the CIF Value plus Import Duty:
VAT = 10% x [CIF Value + Import Duty]
- Article 22 Income Tax:
The Article 22 Income Tax rate varies depending on the type of goods, typically falling into 2.5%, 7.5%, or 10% categories. Calculate it as:
Article 22 Income Tax = Tariff x [CIF Value + Import Duty]
- Luxury Goods Sales Tax (LGST):
LGST is applicable only to certain goods classified as luxury items. Compute it as:
Luxury Goods Sales Tax = Tariff x [CIF Value + Import Duty]
- Excise:
Excise is imposed on excisable goods, and the calculation is based on the excise value per unit. Ensure that it is applied only to goods that qualify for excise tax.
Indonesia Import Regulations
Before diving into the specifics, it’s crucial to have an overview of Indonesia’s import regulations. These regulations ensure compliance and include various types of import permits.
Types of Import Permits in Indonesia
Importing goods into Indonesia requires several licences and permits to ensure compliance with the country’s regulations. Here’s an overview of the types of import permits in Indonesia:
API (Angka Pengenal Importir) – Importer Identification Number
To enable the import process, you will require an API, which serves the purpose of managing a database of importers and overseeing import activities. There are four distinct types of API:
- General Importer Identification Number (API-U)
- This import licence is issued to trading companies that intend to import goods for trading purposes in Indonesia.
- Importer Identification Number for Producers (API-P)
- This type of import licence is granted to industrial companies that need to import goods for their operational activities and production, particularly for capital and raw materials.
- Limited Importer Identification Number (API-T)
- API-T is provided to direct investment companies involved in importing goods to support their production, often with the facilitation of the BKPM (Capital Investment Coordinating Board).
- Importer Identification Number for Contractors (API-K)
- It’s important to note that possessing an API doesn’t automatically grant your company the ability to import goods. Some commodities may require additional import licences or necessitate compliance with specific testing and certification requirements from various government departments and ministries. Further details on unique importer identification numbers are explained below.
NPIK (Nomor Pengenal Importir Khusus) – Special Importer Identification Number
The Special Importer Identification Number, or NPIK, is essential for importing specific goods such as rice, corn, soybean, sugar, textiles, footwear, electronics, and toys. To get an NPIK, you first need an API (Importer Identification Number).
But for certain goods, like electronics, you also require recommendations and certificates from the relevant ministries. For example, to import electronic devices, you must obtain a certificate from the Ministry of Communications and Information Technology, which involves testing your gadgets in their laboratory. Similar requirements apply to other specific products.
How to Obtain an Import Licence in Indonesia
Importing goods into Indonesia offers numerous business opportunities, but it comes with an essential prerequisite: obtaining an import licence.
Here’s a step-by-step process on how to obtain an import licence in Indonesia:
- Business Entity Registration: Establish a legal entity in Indonesia, such as a Limited Liability Company (PT) or a Foreign Investment Company (PMA). Your legal entity is closely tied to your import activities.
- Obtain a Taxpayer Identification Number (NPWP): This is a mandatory requirement for all businesses operating in Indonesia, including importers.
- Prepare Required Documents: Gather the necessary documentation, including company registration documents, Articles of Association, organisational structure, a description of your business activities, a copy of your NPWP, and a recommendation letter from the Chamber of Commerce and Industry (KADIN) if required.
- Choose the Appropriate Import Licence Type: Determine whether you need a General Importer Identification Number (API-U) or a Specific Importer Identification Number (API-P) based on your import needs.
- Submit the Application: Send your import licence application to the Ministry of Trade or its local office, and you may need an authorised customs clearance agent to assist with the process.
- Wait for Approval: The approval process can take several weeks as the authorities review your application for compliance with regulations and requirements.
- Customs Registration: After receiving your import licence, apply for a Customs Registration Number (NIK) from the Directorate General of Customs and Excise. This number is essential for customs clearance.
- Compliance and Ongoing Responsibilities: Comply with Indonesian import regulations after obtaining the import licence. It includes staying updated on trade policies, paying customs duties and taxes, and adhering to other regulatory requirements applicable to your imported goods.
Indonesia Customs Procedure
Like many countries, Indonesia has specific customs procedures for importing and exporting goods. These procedures are in place to ensure the proper collection of customs duties and to regulate the movement of goods across its borders.
Below is an overview of Indonesia’s customs procedures:
- Documentation: Proper documentation is crucial when importing or exporting goods. Common documents include:
- Invoice
- Commercial Invoice
- Certificate of Origin
- Bill of Lading
- Packing List
- Insurance Certificate
- The Harmonized System (HS) Code
- Material Safety Data Sheet (MSDS)
- Customs Declaration: Declare your goods to Indonesian customs authorities. It is typically done electronically, and you must provide detailed information about the goods imported or exported.
- Customs Valuation: Indonesian customs will assess the value of the goods to calculate import duties and taxes. It’s essential to provide accurate and complete information to avoid any issues.
- Duty and Tax Assessment: Pay the applicable import duties and taxes. These can vary based on the type of goods, their value, and any trade agreements.
- Inspection and Verification: Customs may conduct physical checks of goods to ensure they match the documentation and comply with safety and quality standards.
- Permits and Licences: Some goods require specific permits or licences for import or export. Make sure to obtain these documents in advance.
- Customs Clearance: Once all the necessary checks are complete and duties/taxes are paid, your goods can be cleared for entry into Indonesia or export.
- Transport and Delivery: Arrange to transport your goods within Indonesia or to their international destination.
- Record-Keeping: Keep records of all customs-related documents and transactions for a specified period, as these may be required for auditing purposes.
- Restricted and Prohibited Goods: Be aware of any restrictions or prohibitions on certain goods. Certain items may not be allowed for import or export due to legal or safety concerns.
- Customs Brokers: Utilise the services of a licensed customs broker who can help you navigate the complex customs procedures and ensure compliance with Indonesian regulations.
- Customs Duty Exemptions and Incentives: Some goods or industries may be eligible for customs duty exemptions or incentives under specific government programs. Check if your imports or exports qualify for such benefits.
Best Practices to Get Started
Here are the steps that we have simplified from DHL’s comprehensive best practices for importing goods to Indonesia:
- Classify the goods.
Identifying your goods categorisation is vital in importing goods to Indonesia. You must identify and verify the HS codes of the imported goods to correctly classify them and determine applicable taxes and duties.
- Conduct the Importer’s due diligence.
An Importer of Record (IOR) is necessary for cross-border trade between parties in the service parts supply chain. Knowing your consignee or IOR and conducting due diligence is essential to ensure they are trustworthy and compliant with regulations.
- Leverage schedule visibility.
Having visibility of the transport schedule is necessary to streamline the cargo manifest submission process and ensure the legal transportation of goods.
- Understand the Incoterm’s responsibilities.
To establish the buyer and seller’s responsibilities and calculate the applicable taxes and duties for cross-border trade, importers must understand the Incoterms, as varying laws and regulations across different countries can complicate international trade and logistics.
- Choose a compliant logistics partner.
Importing goods to Indonesia is complicated, but you can manage the problem with a reliable logistic partner. By selecting a logistics partner compliant with all relevant regulations, you can ensure the import process runs to cost and is time-saving.
How Luwjistik Helps
When navigating the intricate landscape of importing goods to Indonesia, a well-structured and efficient supply chain is paramount for your business’s success. With Luwjistik, you gain access to a robust logistics platform that not only simplifies the intricacies of the supply chain but also connects you to a network of reliable logistics service providers, all while eliminating the need for substantial investments in on-ground logistics assets.
Here is how Luwjistik can assist you:
- Unified API
- Luwjistik presents a singular interface that simplifies importing goods into Indonesia for businesses. This interface serves as a seamless connector between various systems, facilitating the management of shipments, including order submissions, shipment tracking, and inventory handling. It streamlines operations, minimises errors, and expedites order fulfilment.
- Transparent Pricing
- Luwjistik furnishes businesses with straightforward pricing details, enabling them to grasp their shipping costs comprehensively. This transparency is pivotal for budget management and informed decision-making. By breaking down expenses and offering pricing alternatives, Luwjistik empowers companies to fine-tune their shipping strategies, potentially resulting in cost savings.
- Customised Solutions
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- Luwjistik offers tailored solutions that align with your specific logistics requirements to import goods to Indonesia. Whether it involves adjusting delivery schedules, selecting packaging options, or optimising fulfilment methods, Luwjistik provides the flexibility to devise a logistics plan that aligns with your business objectives. This adaptability is invaluable when catering to diverse customer bases, ensuring your logistics remain efficient and adaptable to evolving market demands.
To embark on a transformative journey and explore these strategic logistics approaches, visit our website at Luwjistik.com or contact our representative at commercial@luwjistik.com today.
