Online shops now have to be registered to continue operating. (Antara Photo/Aditya Pradana Putra)

What's the Damage, Sis?: Business License Now Required for All Online Shops


DECEMBER 04, 2019

Jakarta. The government now requires sellers on e-commerce platforms to apply for a business permit to be able to continue operating, one of the government's first steps to tap into the billion-dollar sector.  

Studies projected Indonesia's digital economy would be worth $50 billion in five years with e-commerce accounting for about half of the total.

But apart from income tax and value-added tax incurred by employees and the companies behind the likes of Tokopedia, BliBli and Bukalapak – the platforms themselves have yet to make any profit – the government has generated hardly any tax from the sector. 

The new rule is based on a government regulation signed by President Joko "Jokowi"  Widodo on Nov. 20, called the Trade Through Electronic Systems regulation.

A copy of the new regulation was made available to the press on Wednesday. Containing 82 articles, the regulation makes it mandatory for online shops to apply for a business license. 

Applicants will have to submit their ID card, tax registration number and business address –the one thing that often prevents businesses from applying for a license since it can take a long time to get the authorities to recognize a residential address as a business one as well. 

The World Bank's Ease of Doing Business report showed it still takes an average Indonesian 10 days and costs him around $225 – 5.7 percent of his annual income – to obtain a business license. 

Hestu Yoga Saksama, a spokesman for the director general of taxation, has downplayed the impact of the regulation on teenagers and housewives, who make up millions of the country's online sellers. 

"It doesn't mean that people who are not required to have a tax registration number cannot open an online shop," Hestu said. 

The regulation excludes individuals who only occasionally sell products or services online.

Danny Darussalam, a tax expert from the Darussalam Tax Center consultancy, said the regulation would help the government collect data on potential taxpayers, which has been one of the tax office's main problems in trying to expand the country's tax base. 

"What this regulation wants to achieve is to improve the tax office's data collection, aside from increasing the tax revenue," Darussalam said. 

The new regulation also stipulates that goods and services that could jeopardize national security have to obtain a security clearance from the authorities before being sold. 

Foreign sellers who have made a certain number of transactions, shipped enough packages and recorded enough online traffic in Indonesia also have to appoint a local entity to act as their representative.