According to Article 66 of Law Number 7 of 2014 on Trade (“Law 7/2014”), “Further provisions on Electronic Trade shall be regulated by or under a Regulation of the Government.” Therefore, in order to implement the provision of Article 66 of Law 7/2014, on November 20, 2019, Indonesian President Joko Widodo signed Government Regulation Number 80 of 2019 on Trade through Electronic Systems (“Regulation 80/2019”), which came into force on November 25, 2019.

Regulation 80/2019 categorizes domestic and foreign online business practitioner based on their E-Commerce activities, namely:

1. Merchants
   Individual or business entity that conduct Electronic Offering through Electronic System owned or managed by themselves, or through facilities provided by E-Commerce organizers. On the other hand, sellers that only sell goods/services in a temporal and non-commercial manner do not constitute Merchants under the Elucidation of Article 5 of Regulation 80/2019.
    
2. E-Commerce Organizers
   Individual, business entity or state agency that provides electronic system facilities in order to facilitate E-Commerce transactions. These cover various business models, which are:
   • Online retail or Merchant that have their own E-Commerce facility (e.g. Online streaming platform of audio, films and television programs, and Alfacart, Klik Indomaret);
   • Marketplace platform provider as a place where Merchants may put up Goods and/or Service offerings (e.g. Tokopedia, Shopee, Bukalapak);
   • Online classified advertisement (e.g. Craigslist);
   • Price comparison platform (e.g. Termurah, Telunjuk);
   • Daily deals (e.g. LaKupon, Giladiskon).
3. Intermediary Service Organizers
   Individual or business entity that includes:

• Providers of information-searching system facilities (search engine) services (e.g. Google, Yahoo, Bing);
• Providers of permanent information storage space (hosting) services as well as temporary information storage space (caching) services (e.g. Amazon Web Services).
  
  Furthermore, the following are the impact of Regulation 80/2019 on aforementioned types of domestic and foreign online business practitioners:
• Any foreign online business practitioner actively making offerings and/or conducting E-Commerce to consumers within the jurisdiction of Indonesia and satisfies certain criteria shall be deemed as fulfilling the physical presence in Indonesia and permanently conducting business activities within the jurisdiction of Indonesia. The certain criteria as referred above are as follows:
  • number of transactions;
  • transactions value;
  • number of shipping packages; and/or
  • number of traffics or visitors.
     

Further, the provisions regarding the threshold number shall be regulated under the implementing regulation. Once the certain criteria are satisfied, the type of foreign online business practitioner categorized as E-Commerce Organizers should appoint representatives domiciled within the jurisdiction of Indonesia and able to act and on behalf of them. Unfortunately, this regulation does not stipulate the form of representation, and thus give rise to uncertainties. However, this concept seems similar to the Permanent Establishment (“PE”) practice used by Foreign Tax Subjects to conduct business in Indonesia. The intent of the Indonesian Government, seemingly, is to collect tax from foreign E-Commerce Organizers, which so far not been subject to Indonesian tax.

• Online business practitioners as described in Regulation 80/2019 are required to have their respective business licenses through the Online Single Submission (OSS) system in conducting E-Commerce activities. However, the Intermediary Service Organizers are exempted from the obligation to have a business license if they:
  • are not direct beneficiaries of the E-Commerce transaction;
  • are not directly involved in the contractual relation between parties conducting E-Commerce
     
• In the event that an online business practitioner has caused losses to consumers, this regulation mentions that consumers can report the losses suffered to the Minister. Online business practitioner reported by disadvantaged consumers must resolve the reporting. Otherwise, they will be put on the priority supervision list by the Minister. The Minister can remove them from the priority supervision list if:
  • are consumer satisfaction reports;
  • there is evidence of proper application of consumer protection; or
  • they have complied with the requirements and provisions as regulated under the laws.
    
    Overall, this regulation aims to create a balance between online and offline businesses. But, it should be noted that Regulation 80/2019 does not regulate E-Commerce activities in Social Media. Therefore, the terms of this regulation does not apply to online business practitioners selling goods/services in Social Media (e.g. Facebook, Instagram).

Interested to know more?

Please contact:

Ms. Cassandra Ismail     : cassandra@ekonid.id

Ms. Indah Lestari            : indah(at)ekonid.id

Mr. Kefin Fariz                 : kefin.fariz@ekonid.id

Source: EKONID (AHK Indonesien)