The potential of ecommerce businesses in Indonesia is enormous. It is no wonder that foreign investors want to get involved in the ecommerce startup scene in Indonesia.
But what are the motivators for such huge ecommerce growth in the country? The answers lie in its developing digital infrastructure, substantial population, supportive government, and growing digital, mobile phone, and e-commerce penetration.
How to Start an Ecommerce Business in Indonesia
To start an ecommerce business in Indonesia, you must consider the important steps and requirements.
- Register your foreign or imported products.
- You can have 100% ownership of a startup in e-commerce in Indonesia, as long as you have IDR 100 billion minimum investment capital. If you invest less than IDR 100 billion, you can only have the most foreign ownership at 49%.
- You will also need to obtain your business license in ecommerce through the Online Single Submission system (OSS).
- Ensure that you comply with all related business requirements such as company registration, tax registration, technical licenses, standardisation of goods and services, business conduct, and code of practices.
New Requirements that will Take Place in November 2020
On May 19, 2020, the Ministry of Trade of Indonesia (MOT) issued a new regulation MOT Reg. 50/2020 regarding Provisions on Business Licensing, Advertising, Guidance and Supervision of Businesses Trading Trade through Electronic Systems.
This regulation, which will come into effect in November 2020, aims to clarify the requirements for the rapidly growing ecommerce sector in Indonesia.
Both local and foreign ecommerce companies selling products or services online in Indonesia will have to comply with these new regulations.
MOT Reg. 50/2020 categorises ecommerce businesses into the following:
- Local and foreign ecommerce organisers (PPMSE)
- Local and foreign ecommerce merchants
- Local and foreign Intermediary services organisers (PSP)
Some key new requirements will be discussed in the following according to the types of ecommerce business category:
1. Local and Foreign Ecommerce Organizers (PPMSE)
- Acquire an Ecommerce Trade Business License (SIUPMSE)
- A foreign PPMSE must appoint a representative office of foreign trade
2. Local and Foreign Ecommerce Merchants
- Local merchants must get the proper trade business license for their ecommerce activities
- Local merchants shall obtain a SIUPMSE if they have their own ecommerce platforms or facilities
- Foreign merchants are required to register their country’s business licenses with a local PPMSE
3. Local and Foreign Intermediary Services Organisers (PSP)
- Obtain a SIUPMSE
- A SIUPMSE is not necessary when a PSP is not an ecommerce transaction’s direct beneficiary, or not a direct intermediate party in ecommerce transactions
Other Important Requirements and Changes in MOT Reg. 50/2020
1. E-commerce businesses can now market and promote their products or services through direct or third-party electronic advertisement creation and/or distribution. However, all material and content used in the electronic advertisement must comply with relevant laws and codes of ethics in Indonesia.
2. As discussed above, foreign PPMSEs with more than 1,000 transactions and/or more than 1,000 packages delivered to customers annually must appoint a representative office. A representative office can’t generate any income and can represent only one foreign PPMSE in matters such as consumer protection, dispute resolution, and guidance provision of locally-made products.
3. All representative offices must submit an ESP Certificate (Electronic Service Provider Registration Certificate) within 14 working days upon the issuance of the representative office license.
4. All e-commerce businesses shall prioritise locally-made products and services and increase their competitiveness, as well as supporting Indonesian micro, small, or medium enterprises (UMKM).
5. E-commerce business licenses applied before the issuance of MOT Reg. 50/2020 will stay valid provided that they have not expired or have not been withdrawn.
How Cekindo can Assist
For many years, Cekindo has helped hundreds of startups of ecommerce in Indonesia to grow effectively, from having an initial idea to growing their ecommerce businesses globally.
As with starting any business, you must seek professional advice regarding the latest regulations of establishing a startup in ecommerce in Indonesia. Then, you can choose a suitable legal structure and register your new online business with our assistance.
Each legal entity has different sets of legal and tax responsibilities. Hence, Cekindo’s specialists will also advise you which is best for your situation with our expertise and research.
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