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Navigating import duties and taxes in Indonesia

Navigating import duties and taxes in Indonesia

Bringing goods into Indonesia can be a complex process with many rules and financial factors to consider. This guide is here to help you understand the basics of import duties and taxes so you can make informed decisions and avoid unnecessary costs.

With this knowledge, you can make importing goods into Indonesia smoother and more affordable.

Indonesia’s import duty and tax regulations

Effective January 30, 2020, Indonesia’s Finance Ministerial Regulation (PMK) No.199/2019 has amended import duties to reduce the maximum value for tax-free imported goods. 

The import tax-free threshold has significantly decreased from USD 75 to USD 3 per recipient and shipment. Under the revised regulations, all taxable imported goods in Indonesia now incur a 7.5% import duty and a 10% value-added tax. 

This represents a notable decrease from the previous 10% income tax, value-added tax, and import duty. Consequently, importers are now required to pay only 17.5% for taxable items, a decrease of 9.5% from the previous 27%

Types of custom duties and import taxes in Indonesia

Guide to import duty and tax in Indonesia

In Indonesia, people pay different types of taxes when importing goods from other countries. These taxes are called customs duties, and they serve different purposes. Essentially, they are a way for the government to regulate and control the flow of goods into the country while generating revenue.

1. Import duty (Bea masuk)

This duty is levied on imported goods and is calculated as a percentage of their customs value, which includes:

  • Cost
  • Insurance
  • Freight (CIF value)

2. Value-added tax (VAT or PPN)

Indonesia imposes a value-added tax on imported goods at a standard rate of 11% of the CIF value. Certain essential goods and services may attract lower or zero-rated VAT.

3. Luxury goods sales Tax (PPnBM)

PPnBM is a luxury goods sales tax that ranges from 10% to 95% of the CIF value, depending on the item imported.

Import tariffs in Indonesia

Indonesia uses a system to classify imported goods based on their type and origin, which helps regulate international trade. This system includes many different parts and rules that are important to follow.

Components Description
Harmonized Commodity Description and Coding System (H.S. Code) The H.S. Code forms the cornerstone of Indonesia’s import tariff classification, harmonizing and categorizing products for international trade.
Most-Favoured Nation (MFN) tariff The tariff applies uniformly to all countries without preferential trade agreements. It ensures fair treatment for all trading partners and prevents discrimination in tariff rates.
Preferential tariff Indonesia has engaged in various preferential trade agreements with different countries and regions, each featuring its Preferential Tariff rates.

These agreements offer specific trade benefits, such as reduced or eliminated tariffs, fostering economic cooperation, and strengthening diplomatic ties.

Pre-entry classification (Classification ruling) Pre-entry classification involves securing a classification ruling from the customs authority before importing specific goods.

Batam’s free trade zone

PMK 199/2019 is effective nationwide in Indonesia; however, its application in Batam, a free trade zone, introduces a unique nuance. Within Batam, all imported goods are granted exemption from import taxes and Indonesian import duties until 2023.

This exemption, however, is conditional on the goods remaining within Batam and not subsequently being distributed to other regions in Indonesia.

Read more: Policies and prospects in Special Economic Zones in Indonesia

Prohibited goods for import in Indonesia

Certain items are prohibited (banned) or restricted (subject to specific conditions) regarding import and/or export activities in Indonesia.

Prohibited

  • Narcotic drugs and psychotropic substances
  • Pornographic and obscene material
  • Counterfeit and pirated goods infringing on legally enforceable intellectual property rights
  • Antiquities
  • Aero models (e.g., remote-controlled toy helicopters) operate on high radio bandwidths to prevent interference with security agencies’ communication networks.
  • Indonesia coins covered by the Antique and Art Treasure Act, 1972
  • Maps and literature showing Indonesia incorrectly
  • Chemicals listed in Schedule 1 to the Chemical Weapons Convention of U.N. 1993
  • Some wildlife products prohibited for trade include human skeletons, specific sea shells, beef, animal grease, fat/oil, exotic birds (with a few exceptions), wild animals, live birds, and animal parts.

Restricted

  • Firearms and ammunition
  • Live birds and animals, including pets
  • Plants and their produce (e.g., fruits, seeds)
  • Plants and animals that are endangered (alive or dead)
  • Goods for commercial purposes (for profit, gain, or commercial usage)
  • Radio transmitters not approved for normal usage
  • Gold and silver (for import only), other than ornaments
  • Currency exceeding prescribed limits
  • Telephone and telephony equipment of restricted frequencies
  • Medicines and drugs
  • Certain animals like camels, horses, cattle
  • Semi-processed hides and skins
  • Silkworms, silkworm seeds, and cocoons
  • Family planning devices (NOC from the 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 and oil)

Customs clearance procedure in Indonesia

Once your products arrive in Indonesia, they will go through a process where customs authorities will assign them to one of three different customs zones.

Channel Description Duration
Green Channel Your products are good to go One day
Yellow Channel Some additional documents are needed* 2-3 days
Red Channel Physical inspection is required* Up to 7 days may require re-import
* May include storage costs

How to calculate the total cost of import in Indonesia

For a precise breakdown of your import costs, use these formulas:

  • Total IDR value: (Total USD value + CIF) * IDR exchange rate
  • Import duty: IDR value * Import duty percentage
  • VAT: (IDR value + Import duty) * 10%
  • Income tax (optional): (IDR value + Import duty) * Income tax percentage

Guide to Doing Business in Jakarta

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Start importing with InCorp Indonesia

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  • Fast-track import license acquisition: Save time and resources with our streamlined approach.
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Unlock seamless imports and peace of mind by clicking the button below.

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    Pandu Biasramadhan

    Senior Consulting Manager at InCorp Indonesia

    An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Frequently Asked Questions

    The deadline for an individual tax return is 31 March. A corporate tax return must be lodged within four months after the end of the calendar year or taxable year. More information can be found here: 21 Must-Know Facts about Annual Tax Return in Indonesia.

    You can find the difference below:

    • PT: limited liability company (shareholders are not legally liable for company liabilities)
    • CV: a proprietary company where liability falls on the shareholders

    Register the product with BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). The type of testing and document requirements depend on the type of product you want to register. Also, the time frame for registration could vary between 3 to 15 months.

    Within the scope of foreign direct investment in Indonesia, foreign investors can typically do business in two ways:

    • Set up a PMA (Perusahaan Modal Asing)
    • PMA is a local subsidiary in the form of a limited liability corporation for foreign investment reasons

    • Set up a RO (Representative Office)

    According to Law No. 25/2007 on Investment, foreign investors are required to establish a PMA company in order to make direct investments and conduct commercial and business activities in Indonesia. A PMA firm in Indonesia is a legally recognized business entity that can engage in various commercial and business operations as long as it complies with the current laws and regulations. As for RO, its purposes include conducting market feasibility studies and liaison activities.

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