Opening an E-commerce Company in Indonesia

Since the issuing of Presidential Decree No. 44 Year 2016, foreign investors can now open an e-commerce company in Indonesia with 100 percent of full ownership for foreigners. This condition opens an opportunity for e-commerce business to fully expand in Indonesia.

In this article, we will show you in depth about establishing or opening e-commerce business in Indonesia. Since there are a lot of things to comply, you need to pay attention to every detail to welcome this opportunity.

Defining E-Commerce

All online companies, which focus on marketplaces, websites for daily deals, websites for price- grabber or price finder, online services, and websites for listing.

Understanding the Trend

The awareness of how important internet for your life have increased year by year. Implication is also big. In 2016, 40% of Indonesian total population has internet access. The hype of smartphones and internet among Indonesian people also boost the sector of online shopping, which in 2016 alone is expected to double up than last year (up to US$20 billion). Moreover, for the online retail industry, it contributes up to 5% of the total economy, compared to only 0.7% in 2015. So, as per June 1, 2016, the e-commerce sector was no longer in its negative investment lists.

Which Are Eligible for 100% Foreign Investment?

The Foreign e-commerce company could be owned by 100% foreigners if the company invests at least IDR 100 billion—about US$7.4 million. The companies that invest less than IDR 100 billion could only be owned by 49% of foreigners. If your company invest less than IDR 10 billion but it can open a job opportunities for at least 1,000 local people, it can also be owned 100% by foreign investors.

Important Notes – Restrictions:

1. Below are types of e-commerce businesses that can be owned by 100% foreigners:

• Reservation websites that make the viewers to reserve a service such as a hotel or a restaurant.

• Web portals that publish contents such as articles, audios, and videos but the contents are provided or made by the users.
• Marketplace websites that enables the sellers to meet the buyers.

2. Below are types of e-commerce business that cannot be owned by 100% foreigners (maximum of 49% of foreign ownership):

• Content publishing made by the company itself: websites which published contents, in the form of written, audios, or videos, but the contents are originally made by the company.
• Marketplace website with opportunities for the sellers to advertise their products or services.
• Distribution services websites that allows the company to provide services to deliver things.

Should I Do Product Registration for E-commerce Business?

If you sell the local products, it’s not necessary. But if you sell the import products, you have to register your products before selling them online.

The Types of E-Commerce Business

There are generally 3 types of e-commerce business in Indonesia. They are:

1. The e-commerce business for customers. This is the fast growing and the most popular e-commerce business type in Indonesia, which focusing more on providing the needs of the customers.
2. The e-commerce business for business. This type of e-commerce commonly provides the needs of other businesses.
3. The e-commerce business for government. This last type focuses more on providing the needs of the local, regional, or central government.

The Trend of E-commerce Business Sectors in Indonesia

Currently, the following business sectors are the most popular one in the e-commerce industry in Indonesia. Almost all of them are focusing on the e-commerce business for customers. They include the sectors in apparel or clothing, footwear or shoes, books, cosmetics, bags, watches, automobile accessories, airplane tickets, as well as mobile phones or smartphones.

There are also a growing trend in transportation services (like Uber or Grab), tourism and accommodation, as well as food and beverages.

[2020 Update] Impressively, Indonesia had a massive GDP worth of US$1.02 trillion in 2018. The rapid development of infrastructure and the internet penetration in Indonesia have grown almost 50% in just mere 4 years and contributed to 50% of the digital industry’s value in 2019. Following this, the e-commerce sector will continue to take the lead towards 2025, dominating 60% of the digital industry.

Regulation for E-commerce Business with less than IDR 100 Billion Investment

Businesses with the capital of less than IDR 100 billion can still open a business in Indonesia based on the rule on micro, small, and medium enterprises, which is stated in the Government Regulation No. 17 Year 2013. However, the ownership of foreigners should be maximum of 49%. The description is as follows:

1. Micro enterprises: Investment of less than IDR 50 million (excluding the land and the building) with the revenue of IDR 300 million annually.
2. Medium enterprises: Investment from IDR 500 million to IDR 10 billion (excluding the land and the building) with the revenue from IDR 2.5 billion to IDR 50 billion annually.
3. Small enterprises: Investment from IDR 50 million to IDR 500 million (excluding the land and the building) with the revenue from IDR 300 million to IDR 2.5 billion annually.

Establishing an E-Commerce Business in Indonesia

Here are the legal steps of opening an e-commerce business in Indonesia, for both the big companies or the micro, small, and medium enterprises:

1. Register your company.

In this process, you need to get the form of a company deed and consult with a notary. Further, the notary will help you to check the availability of your company name by accessing the data in the Ministry of Law and Human Rights. Then, the notary will issue some documents needed for further process of company registration.

2. Get a Domicile Letter.

Obtain a domicile letter from the local government where your business is located.

3. Obtain a Tax ID

The domicile letter is a requirement document to make a tax card. You will obtain a tax number (NPWP) and a tax card from the local tax office.

4. Submit your Application online to the Minister of Law and Human Rights.

Complete the application online to register your company to the Minister of Law and Human Rights. You need to submit the application with all of the documents stated previously. Plus a bank statement and the statement of your transaction.

5. Getting SIUP and TDP

SIUP is a permanent business trading license whereas TDP is the company registration certificate which states that your business has been legally registered by the Ministry of Law and Human Rights. After you submit all of the requirements and documents, you can get both of them in the region’s one-stop-service office.

6. Register to the Ministry of Manpower.

Register only if your business has more than 10 staff or workers with a minimum salary of IDR 1 million. Now by registering your company to the Ministry of Manpower, you have certain obligations to include your workers to some working insurance and health insurance.

7. Setting up your e-commerce business legally.

Having completed all of the legal requirements, you can now start to set up your e-commerce business legally.

Check for the summary about establishing a company and other business support services.

2020 Updates on E-commerce Business in Indonesia

Normally, entrepreneurs who are interested in opening an e-commerce company in Indonesia will have to satisfy the following requirements, which will be fully effective in November 2020.

1. Local and Foreign E-commerce Organizers (PPMSE)

• Must apply for an E-commerce Trade Business License (SIUPMSE)
• A foreign PPMSE must appoint a representative office of foreign trade

2. Local and Foreign E-commerce Merchants

• Local merchants must secure a proper trade business license for their e-commerce activities
• Local merchants must obtain a SIUPMSE if they have their own e-commerce platforms or facilities
• Foreign merchants must register their country’s business licenses with a local PPMSE

3. Local and Foreign Intermediary Services Organisers (PSP)

• Must obtain a SIUPMSE
• A SIUPMSE is not required when a PSP is not an e-commerce transaction’s direct beneficiary, or not a direct intermediate party in e-commerce transactions

How Cekindo Can Assist in Opening an E-commerce Company in Indonesia

Cekindo can help your company for both 100% foreign ownership and partially ownership e-commerce company in Indonesia (Read: step-by-step guide establish a company). Most importantly, we also give services for micro, small, and medium enterprises to enter Indonesian e-commerce business easily with no hassle.

Moreover, we guarantee that registering and starting your business with us is the best way to cut down all of your burdens concerning the many requirements and the confusing bureaucracy in Indonesia.

Just contact us via the form below for further discussion. Opening an e-commerce company in Indonesia will be seamless.