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Indonesia continues to experience rapid growth as one of the world's leading e-commerce markets. Many Japanese companies are likely considering entering this dynamic market. However, to ensure business success, it is crucial to thoroughly understand local laws and regulations and strictly adhere to them.

This blog explains the main legal regulations governing e-commerce in Indonesia. We will focus on key points that e-commerce operators need to know regarding licensing, consumer protection, and the latest tax regulations.

Why Indonesian E-commerce Regulation is Important Now

In recent years, the Indonesian government has strengthened the legal framework governing e-commerce, with the aim of encouraging the healthy development of the digital economy. This initiative is driven by the following reasons:
• Protection of domestic industry: To protect small and medium-sized enterprises from a flood of low-cost imports.
• Enhanced consumer protection: To protect consumer rights in online transactions.
• Fair tax revenue: To obtain fair tax revenue from digital transactions.

Especially in 2023, regulations related to social commerce (transactions via social media) and cross-border e-commerce (transactions across national borders) have been tightened, significantly impacting both foreign and local companies. To adapt to these changes, it's important to stay up-to-date on the latest legal regulations rather than relying on outdated information.

Main licenses required for an e-commerce business
To run an e-commerce business in Indonesia, licenses appropriate to the type and scale of the business are required. Among these licenses, the Business Identification Number (NIB) and the Importer Registration Number (API) are crucial.

Business Identification Number (NIB)
The NIB (Business Identification Number) is a basic business license required for all companies operating in Indonesia. E-commerce businesses are no exception. This NIB can be obtained through the Online Single Submission (OSS) system. NIB processing is usually carried out as part of the company establishment process.

Import Company Registration Number (API)
If your company is considering running a cross-border e-commerce business that involves importing goods from abroad for sale in Indonesia, obtaining an API is mandatory. There are two types of API: the "General Import License Number (API-U)" and the "Producer Import License Number (API-P). The type required depends on the type of goods handled and the business model implemented.
Additionally, when handling certain imported goods (such as pharmaceuticals, cosmetics, or food), special licenses from the relevant government ministries may be required. Particular attention is needed because some products require Halal certification, which requires prior verification. For more details, please click here. click here.
Consumer Protection Law: To fulfill your responsibilities as a business actor
In Indonesia, the Consumer Protection Law (UUPK), passed in 1999, also applies to e-commerce. This law aims to protect consumer rights in transactions and requires businesses to fulfill the following obligations: • Provision of Accurate Information: The obligation to provide accurate and honest information regarding goods and services. False advertising and exaggerated claims are strictly prohibited. • Assurance of Goods and Services: The obligation to ensure that goods and services sold meet health, safety, and environmental standards. • Establishment of a Consumer Complaints Handling System: The obligation to establish a system that allows for the prompt and appropriate handling of consumer complaints and inquiries. In addition, the law governing e-commerce, the Information and Electronic Transactions Law (ITE Act), stipulates the validity of electronic signatures in online transactions and the authenticity of digital data. When signing online contracts, it is crucial to follow the formalities stipulated in this law.

Tax on Digital Services and Recent Changes

For e-commerce businesses, taxation is a critical factor that directly impacts business profits. In Indonesia, not only domestic e-commerce operators but also foreign digital service providers are required to collect Value Added Tax (VAT) if they meet certain requirements. VAT regulations have undergone frequent changes in recent years. For more details, please click here.
It should be noted that the 2023 regulatory amendments have clarified customs and tax rules for imported goods in cross-border e-commerce. As a result, even low-value goods are increasingly subject to taxation.

Key points regarding customs and taxes:
• Import declaration: The price, type, and quantity of imported goods must be reported accurately.
• Application of tax rates: Import duty, VAT, and income tax are imposed according to the type and price range of the goods.

To comply with these tax regulations, it is crucial to properly register with the Indonesian tax authority (DGT) and file accurate tax reports.

For e-commerce success in Indonesia
Indonesia offers very attractive business opportunities thanks to its vast market and wave of digitalization. However, regulations are constantly changing, and running a business without paying attention to them carries significant risks.

To succeed in e-commerce in Indonesia, always keep the following three things in mind:
1. Obtain the appropriate license for your business model.
2. Understand and comply with consumer protection obligations.
3. Stay up-to-date with the latest customs and tax regulations and pay your taxes correctly.

As a local Indonesian law firm, we provide legal support to help Japanese companies operating in Indonesia run their businesses with peace of mind. If you need consultation regarding e-commerce regulations or assistance with business establishment procedures, please contact us without hesitation.

We hope this blog is helpful in supporting the success of your business in Indonesia.