Guide to Indonesia Import Tariffs – New Rule to Boost Local SMEs Competitiveness
For a vast country like Indonesia, it has many trading ports. With its large population ranging from every income class, Indonesia opens its borders to all kinds of imported goods. Although Indonesia welcomes a variety of imported goods, the tax on these items varies from zero per cent to almost 200%. Indonesia is a reserved country. That applies to its people’s views on specific topics. Hence, sensitive materials are taboo and could not cross their borders physically. But with technology, anything is possible, though that is up to individual responsibility. Recently, Indonesia revised its import tariff. Indonesia latest import tariff is expected to reduce the maximum value of imported goods into the country. This article provides Guide to Indonesia Import Tariffs.
The latest move to reduce imported goods value made by the Indonesian government takes effect end of January 2020. The new regulation is called the PMK 199/2019. The tariff intends to slash the maximum value of imported goods to become tax-free. The PMK 199/2019 states that the maximum amount of imported duty-free items will be US$3 for each shipment. Previously, each purchase for imported goods was US$75. The new threshold is to control buying cheap foreign products and protect small and medium firms.
Tax for Goods
Indonesia applies 7.5% import duty, and 10% value-added tax (VAT). There is another 10% income tax on top of the import duty and VAT. Now, as Indonesia implements the PMK 199/2019, the 10% income tax is no longer applicable. Hence, importers only pay 17.5% for imported taxable goods into the Indonesia market. However, the regulation does not apply to specific products such as bags, garments and shoes. There are local producers of these products, and by applying the new tariff in these sectors, will only hurt the local economy.
Creating the Balance
Currently, Indonesia’s retail market is flooded with imported goods. Most of them are not subjected to import duties which create an imbalance of local product choices and imported versions. For every retail good, there should be a local version that is up to par in terms of quality, value and price. If there are more imported goods in the market, the local SMEs which are already struggling will further feel abandoned. With the new rule, local SMEs trading their products over E-commerce will have a level playing field against foreign-produced goods. As such, local producers will have a better chance of promoting and marketing their goods to consumers. Consumers, in turn, will get to experience and appreciate locally made products.
Free Trade Zone
The PMK 199/2019 is applicable throughout Indonesia, except Batam. Batam is a free trade area within Indonesia. All imported goods that end up in Batam is not taxed unless items are distributed to other regions in Indonesia. Hence, the only way this rule will work is that it applies to imported goods redistributed out of Batam and into other Indonesian areas.