How To Apply For An E-commerce Business License In Indonesia

Types of E-commerce Companies in Indonesia

The e-commerce industry has witnessed remarkable growth, fostering different kinds of e-commerce companies in Indonesia. Each of these companies can be classified under one of the four key e-commerce models:

• Business-to-Consumer (B2C): This type of e-commerce is commonly known as business-to-consumer (B2C), where businesses directly sell products or services to individual consumers. Lazada is the best example of a B2C business in Indonesia.
  
• Business-to-Business (B2B): B2B e-commerce companies focus on facilitating transactions between businesses. It includes wholesale trade, where businesses purchase products in bulk from manufacturers or distributors. Bukalapak, Ralali, and Bhinneka are a few examples.
  
• Consumer-to-Consumer (C2C): C2C e-commerce involves transactions between individual consumers. Individuals buy and sell products or services directly to one another, often earning commissions or fees from transactions.
  
• Consumer-to-Business (C2B): In this type of e-commerce, individual consumers offer products or services to businesses.

In Indonesia, a vibrant ecosystem of diverse e-commerce companies has revolutionized the retail landscape, ensuring convenience, accessibility, and an extensive product selection in the digital realm. If you want to start and prosper your e-commerce business, you can focus on the following niche in the current Indonesian market:

1. Online marketplaces: In Indonesia, online marketplaces such as Tokopedia, Shopee, and Bukalapak are prominent platforms connecting buyers and sellers across various product categories. They offer a wide range of products, including fashion, electronics, and home goods. As per statistics, Tokopedia recorded the highest traffic in the first quarter of the financial year 2022, with around 158.35 million clicks.
2. Fashion and apparel: In Indonesia, Zalora dominates the fashion e-commerce industry, offering over 30,000 fashionable footwear and clothing for women and men from renowned international and local brands. Tokopedia is another strong competitor, providing a diverse range of products, including modest fashion options for Muslims through its dedicated line called “Tokopedia Salam.”
   
3. Electronics and gadgets: Besides Tokopedia, Bhinneka, Blibli, and Bukalapak focus on electronics and gadgets, providing a wide range of tech products such as smartphones, laptops, and home appliances to cater to the tech-savvy Indonesian market.

4. Food delivery and grocery: GoFood, with an overwhelming 78% of the votes, has emerged as the top-rated food delivery app widely preferred by Indonesians. Other major players include GrabFood, GoMart, HappyFresh, etc. These platforms enable users to order food from local restaurants and have groceries delivered to their doorstep, providing convenience and accessibility.
   
5. Travel and hospitality: Traveloka currently qualifies as a unicorn in Indonesia’s travel and hospitality market. Most Indonesians prefer to use the hotel and flight ticket booking services of Traveloka. Tiket.com is another online travel agency famous for its travel packages.
   
6. Beauty and cosmetics: In Indonesia, companies like Sociolla, Orami, JD.id, and others are specialized in the beauty and cosmetics industry. These platforms offer a wide selection of skincare, makeup, and personal care products from local and international brands, catering to the diverse needs and preferences of Indonesian consumers.
   
7. Home and living: In Indonesia, companies like Fabelio, IKEA, Informa, and UrbanIndo provide online platforms for purchasing furniture, home decor, household items, etc., catering to the growing demand for home improvement and interior design.
   
8. Automotive: In Indonesia, there are notable companies like Otosia, Mobil123, Ralali, Bhinneka, and Carmudi that specialize in the automotive industry. These platforms cater to users who want to buy and sell new and used vehicles, providing additional services such as financing and insurance.

Indonesian E-Commerce License – Who is it for and What are the Benefits

In Indonesia, an e-commerce business license is vital for all businesses and individuals engaged in online selling and conducting commercial activities via digital platforms. The license is particularly necessary for –

• Entrepreneurs and startups
• Foreign investors
• Established businesses and SMEs

The PSE (Penyelenggara Sistem Elektronik) certificate obtained from MOI validates that your company meets the prescribed data protection essentials and that its electronic system meets all safety standards. In short, obtaining a license is a necessary requirement to operate your e-commerce business legally in Indonesia. Some of the key benefits associated with attaining an e-commerce business license include –

1. Legal Recognition: An e-commerce license provides a legitimate framework for online operations, ensuring compliance with relevant laws and regulations.
   
2. Trust and Credibility: Having an e-commerce business license instills confidence in customers, showcasing the business’s commitment to professionalism and adherence to industry standards.
   
3. Consumer Protection: It ensures that the business follows consumer protection laws, safeguarding the interests and rights of online buyers.
   
4. Access to Online Marketplaces: An e-commerce license enables businesses to join established online marketplaces and platforms, reaching a broader audience and increasing sales opportunities.
   
5. Payment Gateway Integration: Possessing an e-commerce license allows businesses to integrate secure and reliable payment gateways, facilitating smooth and secure online transactions.
   
6. Access to Government Initiatives: An e-commerce license can provide access to government programs and incentives to support and promote the growth of the e-commerce sector in Indonesia.

Steps to Register an E-commerce Business in Indonesia

It can be overwhelming to register an e-commerce firm in Indonesia, especially if you’re new to the industry. Follow these guidelines for a smooth and compliant registration process in the Indonesian market.

Choosing a business classification

Ascertain the appropriate business classification that aligns with the nature of your e-commerce operations. Common classifications include online service providers, online marketplaces, etc. This classification will determine the licenses and permits you essential for your specific business activities.

Incorporating your e-commerce business in Indonesia

Incorporating your e-commerce business in Indonesia is crucial to establishing a legal presence. The registration process is conducted online. Upon completing the registration procedure, you will receive a Company Registration Certificate (TDP), an Identification Number to Operate (NIB), and a Taxpayer Identification Number (NPWP), allowing you to operate your e-commerce business in Indonesia legally. You can consult with professionals or legal experts to ensure a smooth and compliant incorporation process.

Ensure that your business addresses have the necessary building permits to conduct commercial activities. This will help to get the NPWP from the local tax office easily. You can utilize a virtual address to bring down overhead costs.

Acquiring an Electronic System Provider (PSE) license

Apart from completing the business registration, you are also required to obtain an Electronic System Provider (PSE) license from the Ministry of Communication and Information Technology. The website registration procedure and acquisition of the PSE license stretches for around two weeks.

This license ensures compliance with electronic transaction regulations and data protection requirements. It verifies that your business operates a secure electronic system and safeguards customer data.

Types of Indonesian business licenses

Indonesia has three major types of e-commerce business licenses required based on the nature of the business activity. These are –

• General business license
• Industrial business license
• Construction business license

Legal basis for Indonesian business licenses

The legal basis for Indonesian business licenses stems from a comprehensive framework of laws and regulations that govern business activities in the country. Regulation 24/2018 is primarily responsible for overseeing the issuance of business licenses. The OSS eases the application process and can be used by multiple business entities, like sole proprietorships, partnerships, limited liability companies, etc.

Indonesian business license validity period

The validity period of an Indonesian business license usually extends up to 30 years.

Nevertheless, businesses must regularly monitor the validity of their licenses and ensure timely renewal to comply with Indonesian regulations. Failure to renew licenses on time may result in penalties, fines, or potential disruption to business operations.

Regulations to Start an E-commerce Business in Indonesia

The Indonesian government has taken stringent measures to safeguard the interests of e-commerce businesses and consumers while ensuring tax compliance. The Government Regulation 80 of 2019 (GR 80, 2019) permits the following entities to participate in e-commerce:

• Consumers
• Government agencies
• Business practitioners
• Non-business individuals

As per GR 80, 2019, every e-commerce business must respect and observe the regulations to benefit and secure the customers. Here’s a breakdown of key regulations and considerations:

Handling consumer complaints

E-commerce businesses must have a mechanism in place dedicated to handling consumer complaints effectively. This entails –

• Establishing clear communication channels (contact information)
• Hiring an efficient and proactive support team or staff to provide the required assistance
• Setting time durations to resolve complaints
• Charting out proper procedures clearly defining the method to be adopted by consumers to raise an issue or complain
• Setting follow-up procedures

Personal data protection

Every e-commerce business must prioritize the protection of personal data in accordance with Indonesia’s personal data protection laws. This means –

• Procuring personal information through legal means
• Implementing secure data storage and transmission practices to steer clear of data breaches
• Ensuring all personal data is accurate and updated and offering data providers appropriate means to alter details
• Prohibiting the usage of personal data upon the expiry of the utilization period

Tax compliance for -commerce businesses in Indonesia

GR 80 underscores that e-commerce businesses must abide by the prevalent income tax regulations under Law 30 of 2008. This also implies that SMEs are liable to pay 0.5% in income tax, whereas large enterprises have to shell out a corporate tax rate of 25%. Moreover, individual taxpayers may have to charge VAT on their customers if their earning reaches 4.8 billion Rupiah (USD 342,000) or more.

What Other Licenses Do I Need to Open an E-commerce Business?

When commencing an e-commerce business in Indonesia, awareness of the additional licenses and permits required for a smooth sail is crucial. Besides the e-commerce business license, possession of other licenses may be necessary depending on the nature of your business operations. However, you must also procure the Trade Business License via Electronic System (SIUPMSE) through the Online Single Submission System (OSS).

In addition, you may need the Company Registration Certificate or Tanda Daftar Perusahaan (TDP), Tax Identification Number known as Nomor Pokok Wajib Pajak (NPWP), Business Identification Number (NIB), and Import/Export License. If your company collects and processes personal data, you may require relevant certifications and permits (like the PSE certificate) to adhere to data security protocols.

Tips for Starting an E-commerce Store

Establishing an e-commerce store in Indonesia can be highly exciting, but the ground rule is not to get carried away. Consider the following tips when starting your e-commerce store in Indonesia:

Do not expect year-one profitability

Building a profitable e-commerce store requires time and effort. Realistic expectations and projections lead to long-term success. Instead of seeking instant profits, focus on customer acquisition, testing, analysis, and preparation for initial investments and potential losses. Monitor and supervise your business for at least two years to gain a thorough understanding. Avoid measuring profitability in the first year to stay on track.

Know your target audience

Truth be told, your target audience is your ladder to success. Dedicate ample time and effort to comprehend the customers you aim to serve. Conduct market research to identify their demographics, preferences, and shopping habits. This knowledge allows you to customize products, marketing messages, and customer experience, driving increased sales.

Sell an in-demand product

Choose products that project a high demand in the current Indonesian market. Research trending products, analyze competition and identify gaps in the market that you can fill. Offering products that solve a problem or meet a specific need generally attracts more customers and gives you a competitive edge.

For instance, the rise in eco-friendly and sustainable products has created a demand for reusable household items and zero-waste products. You can cater to this growing market and attract eco-conscious consumers by offering environmentally friendly alternatives.

The strategy is to develop a line of products that will suffice the underserved customers. Once your brand gains recognition and loyalty, you can launch a new product segment. The smart decision is to play safe in the formative stages of your business. 

Conclusion

In Indonesia, the e-commerce landscape is vibrant and diverse. It features an extensive array of companies catering to the specific needs of Indonesian consumers. As the country’s e-commerce market continues to expand rapidly, obtaining a proper license is crucial for entrepreneurs seeking to establish a legitimate and successful online business. Furthermore, the application for a business license for ecommerce and registration procedure is also pretty straightforward.

Understanding the legal requirements, choosing the appropriate business classification, incorporating the business, and obtaining an Electronic System Provider (PSE) license ensure compliance with Indonesian laws and regulations. Although starting a new venture may seem puzzling, it can be immensely rewarding if you follow the basic guidelines.

With the right approach and a valid e-commerce business license, entrepreneurs can tap into the immense opportunities offered by Indonesia’s thriving digital economy and unlock their business’s full potential.

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