New Import Regulation for Tax-free Imported Goods
Updated: Jun 1, 2020
Online shoppers, prepare. This will not only apply for locals but also for foreigners. A new import regulation will be set by the government that will lower the maximum value of tax-free imported goods at the end of January 2020.
What is the purpose of the new regulation?
The new regulation is expected to create a level playing field between domestic products, which mostly come from small and medium industries and imported products as mentioned by Directorate General of Customs and Excise (DJBC). Customs data shows that retail imports jumped to nearly 50 million items in 2019, compared to 19.6 million items in 2018 and 6.1 million in 2017. Most of the goods were imported from China. Importers and courier services need to comply with the rules by refraining from splitting shipments of goods or under-invoicing imported goods. Therefore, the new regulation would be enacted to augment the competitiveness of domestic businesses and to protect domestic small and medium enterprises (SMEs) and retailers as imported goods had flooded the country’s market.
The regulation of the Ministry of Finance (PMK) No.199/2019 sets the maximum value of non-taxable imported goods at US$3 per shipment, far lower than the current $75. This regulation will take effect on January 30th. While importers would pay a 10 per cent income tax in addition to the import duty and value-added tax previously, the new regulation states that the taxable goods will be subject to an import duty of 7.5 per cent and a value-added tax of 10 per cent. With the revision, total taxes that have to be paid will be only 17.5 per cent instead of the previous 27 per cent.
What products will be imposed by the new tariff?
The new import tariffs will not be applied to bags, shoes or garment products. These products will be subject to normal tariffs as the government is trying to protect local producers. With the new rules, it is hoped that import duty exemption can be truly utilized for personal use. Additionally, there will be different tariff rates for imported textiles, shoes, and bags. Textiles will be subject to 15-20 per cent in import duties, as are bags, while shoes will be subject to a 25-30 per cent rate. This is also before applying the 10 per cent VAT and 7.5 per cent in income tax.
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