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Indonesian government introduces new e-commerce regulations for local and foreign players

According to the regulation, those who sell their goods via e-commerce platforms must obtain a business license.

The Indonesian government has issued new regulations which includes principles that must be obeyed by local and foreign e-commerce players, including tax provisions and consumer protection mechanisms.

The regulation (PP) number 80 of 2019 concerns trade through electronic systems. According to the state secretariat’s website, PP number 80 of 2019 (better known as PP E-commerce) states that what is meant by trading through an electronic system is “trade in which transactions are carried out through a series of electronic devices and procedures.”

However, it is unclear whether the regulation also impacts transactions in social media or messenger platforms.

Foreign online businesses offering to or trading goods with consumers in Indonesia are considered as conducting business activities in the country if they meet certain criteria in terms of the number and value of transactions, the number of package shipments, and the level of traffic of the site or application. Nonetheless, the regulation does not state the minimum number of transactions or traffic values in question. Foreign players are also required to designate a representative in the country to act on behalf of the company.

In addition, Article 8 of PP E-commerce states that foreign electronic business activities must abide by taxation provisions and mechanisms in accordance with statutory provisions. This means the new regulation does not set provisions specifically regulating e-commerce taxation.

E-commerce players from within and outside the country are encouraged to use Indonesian domain names (dot id) for their websites. They are also obliged to assist government programs, among others, prioritizing trade in domestic products or services, and increasing the competitiveness of domestic products or services in their platforms.

Moreover, PP E-commerce requires business enterprises, whether they are individuals or entities, who sell through e-commerce platforms to have a license as stated in article 15: “Business operators are required to have a business license in conducting electronic business activities.” They can apply for the license through an online single submission system, an integrated licensing service provided by the government.

Responding to the new rules, Intan Wibisono, head of corporate communications at Bukalapak told KrASIA that the firm is still reviewing all the points in the regulation. Regarding the business license obligation, Bukalapak as a business entity already has a license, but this could be a barrier to entry for small and medium enterprises in its platform who want to expand their business, she said.

Indonesian e-commerce association chairman Ignatius Untung also shared this concern.

“There needs to be a clear definition of business enterprises here. Is everyone who sells their goods automatically referred to as a business enterprise? I don’t think so because some of the people who sell goods through e-commerce don’t make a living from there,” Untung told KrASIA.

He also said that this barrier could have a negative impact on the e-commerce industry going forward, resulting in online sellers or merchants switching to social media platforms instead.

However, there is an exception to this rule. Those who are not required to have a license are the organizers of an intermediary facility who does not benefit directly from the transaction, and is not directly involved in the contractual relationships of the parties who make online transactions.

The new regulation also requires online businesses to protect customer data and to share the data with authorities for statistical purposes.

As for consumer protection, the new regulation states that if consumers have complaints against e-commerce players, the latter must respond to the complaints. Otherwise, they will be included in the priority list of ministerial supervision, which is accessible to the public.