With the continuing growth of the e-commerce industry, setting up an e-commerce business is an option to consider when planning to enter the Indonesian market.
As with all investments, it is necessary to understand the local regulations for e-commerce businesses in Indonesia. Familiarizing yourself with relevant laws will help you plan your steps in establishing your business.
There are several things investors need to know before setting up an e-commerce business in Indonesia. We will discuss relevant business classifications, foreign ownership of e-commerce businesses, and the process of registering an e-commerce business.
Business Classifications for E-commerce Businesses in Indonesia
In Indonesia, “e-commerce” applies to businesses that conduct transactions through an electronic system. Most e-commerce business activities are open to full foreign ownership.
An e-commerce provider is a company that provides facilities for e-commerce transactions. Such businesses include:
- Online marketplaces
- Daily deals
- Price aggregator or price comparison
- Online classified advertisements
Foreigners can own up to 100% of a business classified as an e-commerce provider if their investment and paid-up capital is at least IDR 100 billion. If the investment amount is less than that, foreigners can own up to 49% of the business. Some of the well-known companies that fall under this classification are Lazada, Tokopedia, and Shopee.
While not classified as e-commerce, payment gateways play a major role in facilitating e-commerce transactions. Foreign investors can have partial ownership of payment gateways or other fintech companies in Indonesia.
Merchants or Online Sellers
Merchants or online sellers are business entities or individuals who conduct transactions using an electronic system. A merchant may own the electronic system used or may go through a third-party like a marketplace.
Foreign investors may have up to 100% ownership of a business that operates as a merchant. This depends on the specific activities of the business.
Examples of businesses that allow majority foreign ownership:
|Business Activities||Maximum Allowed Foreign Ownership||Examples|
|Online Retail of own goods||100%||matahari.co.id|
|Transportation Service with own fleet||100%||Lalamove|
Registering an E-commerce Business in Indonesia
1. Choosing a business classification
Your business classification must match your intended business activities. Note the percentage of allowed foreign ownership of a business depends on the business classification. Emerhub’s consultants can advise you with choosing the most appropriate classification for your company.
2. Incorporating your e-commerce business in Indonesia
Incorporating a company in Indonesia involves getting your Tax Identification Number (NPWP) and Identification Number to Operate (NIB). The local tax office issues NPWP so your business must have an address. Emerhub offers an easy solution to registering your business with our virtual office address.
Business addresses must have appropriate building permits for commercial activities. Our virtual office has the necessary building permits so you can register your business right away. Using a virtual office address is also a way to keep your overhead costs low since it’s a much cheaper option compared to renting out a large commercial space.
Emerhub will be able to complete your business registration within a week when using our virtual office service.
3. Acquiring an Electronic System Provider (PSE) license
In addition to registering your business, you must also acquire an Electronic System Provider (PSE) license. Registration of your website with the Ministry of Communication and Information Technology to acquire the PSE license takes about 2 weeks.
Start an online business in Indonesia.
Register your company in Indonesia with Emerhub.
Regulations for E-commerce Businesses in Indonesia
Per Government Regulation 80 of 2019 (GR 80), e-commerce businesses must adhere to regulations that protect and benefit consumers.
Personal Data Protection
Any online businesses that collect personal data must follow data protection standards set out in GR 80. The regulation makes references to the standards in the European Union’s General Data Protection Regulation and the APEC Privacy Frameworks.
Handling Consumer Complaints
According to GR 80, businesses must also provide a way to handles complaints from consumers. E-commerce businesses must create proper procedures to allow consumers to extend complaints. This involves providing contact information and hiring staff who can manage complaints.
Tax Compliance for E-commerce Businesses in Indonesia
Existing income tax regulations apply to online sellers. The income tax rate for businesses earning IDR 50 billion or less annually is 12.5%. Businesses earning more than that have an income tax rate of 25%.
Ready to start your e-commerce business in Indonesia? Get in touch with our consultants by filling out the form below or by sending an email to [email protected]. We will be happy to help you start your business in Indonesia.