Everything You Need to Know About the New Indonesian Law as a Tourist

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everything you need to know about the new indonesian law as a tourist

Indonesia has introduced a new law that will affect tourists who buy goods online from overseas sellers. The new law, which took effect on January 1, 2024, requires tourists to pay a 10 per cent sales tax on low value goods (LVG) that are shipped from abroad to Indonesia. The new law aims to protect local producers and consumers, and to increase the government’s revenue.

What are low value goods and how are they taxed?

Low value goods are goods that are priced below 500,000 rupiah (about $35) each, excluding shipping and insurance costs. These goods include clothing, accessories, cosmetics, books, electronics, and other items that are commonly bought online by tourists and locals alike².

Under the new law, tourists who buy LVG online from overseas sellers have to pay a 10 per cent sales tax on the value of the goods, plus the shipping and insurance costs. The tax is collected by the customs authorities when the goods arrive in Indonesia, and the tourists have to pay the tax before they can receive their goods.

The tax applies to all LVG, regardless of the origin, destination, or quantity of the goods. However, there are some exemptions and exceptions, such as:

  • Goods that are sent as gifts or donations, as long as they are not for commercial purposes, and the value does not exceed 500,000 rupiah per shipment.
  • Goods that are bought from e-commerce platforms that have registered with the Indonesian tax authorities, and have collected and remitted the tax on behalf of the tourists.
  • Goods that are subject to other taxes or duties, such as alcohol, tobacco, luxury goods, or goods that are prohibited or restricted by Indonesian law.

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Why is the new law introduced and what are its impacts?

The new law is introduced to address the issue of tax evasion and unfair competition by overseas sellers, who can offer lower prices and avoid paying taxes on their goods. The new law is also intended to support the development of the local e-commerce industry, which is expected to grow rapidly in the coming years, and to create more jobs and income opportunities for Indonesians.

The new law is expected to have positive impacts, such as:

  • Increasing the government’s revenue, which can be used to fund public services and infrastructure projects, and to reduce the budget deficit and the public debt.
  • Protecting the local producers and consumers, who can benefit from the level playing field and the fair competition, and who can access more quality and affordable goods and services.
  • Enhancing the compliance and transparency of the e-commerce sector, which can improve the trust and confidence of the tourists and the locals, and which can prevent fraud and smuggling.

The new law, however, could also have negative impacts, such as:

  • Increasing the prices and the costs of the online shopping, which could reduce the demand and the attractiveness of the overseas goods, and which could affect the spending and the satisfaction of the tourists and the locals.
  • Creating delays and inconveniences in the delivery and the receipt of the goods, which could affect the convenience and the experience of the online shopping, and which could cause dissatisfaction and complaints from the tourists and the locals.
  • Triggering disputes and conflicts between the tourists and the sellers, the customs authorities, or the e-commerce platforms, who may have different interpretations and expectations of the new law, and who may face difficulties and challenges in the implementation and the enforcement of the new law.

The new law, therefore, is a significant and important policy that affects the online shopping behavior and experience of the tourists and the locals, and that has implications for the economy and the society of Indonesia. The new law, therefore, should be communicated and explained clearly and effectively to the tourists and the locals, and should be monitored and evaluated regularly, and be adjusted and improved accordingly, to ensure that it achieves its objectives and benefits, and minimizes its costs and harms, for all parties involved.

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