I. Introduction
As part of the second economic stimulus package introduced by the government last September aimed at boosting the country's economy, the government issued Government Regulation No. 85 of 2015 which amends Government Regulation No. 32 of 2009 on Bonded Storage Places ("Regulation 85"). Regulation 85 introduces the concept of Bonded Logistic Centers (Pusat Logistik Berikat) as one type of Bonded Storage Place (Tempat Penimbunan Berikat) in Indonesia. A Bonded Storage Place is basically a building, site or area that meets certain requirements which is used to store goods for certain purposes and obtains import duty postponement. Previously, there were only 6 types of Bonded Storage Place, namely:
1. Bonded Warehouse (Gudang Berikat)
2. Bonded Zone (Kawasan Berikat)
3. Bonded Exhibition Area (Tempat Penyelenggaraan Pameran Berikat)
4. Duty Free Shop (Toko Bebas Bea)
5. Bonded Auction Place (Tempat Lelang Berikat)
6. Bonded Recycling Zone (Kawasan Daur Ulang Berikat)
It is expected that the introduction of the Bonded Logistic Center would encourage investment in the manufacturing sector in Indonesia because these centers would facilitate the flow of basic materials. At present many industrial companies keep their materials or products in bonded storage units in Singapore and Malaysia.
II. Things to Know About Bonded Logistic Centers
A. Operation and Business
1. Regulation 85 defines a Bonded Logistic Center as a Bonded Storage Place to store goods originating from outside the Indonesian customs area and/or goods from other places in the Indonesian customs area, which may be accompanied with one or more simple activities, for a certain period of time for later removal.
2. The operation of a Bonded Logistic Center is carried out by a Bonded Logistic Center operator having the status of an Indonesian legal entity and domiciled in Indonesia.
3. In one Bonded Logistic Center, one or more businesses may be conducted.
4. Business in a Bonded Logistic Center is conducted by:
a. a Bonded Logistic Center entrepreneur(s); or
b. a Bonded Logistic Center entrepreneur also acting as operator.
5. A Bonded Logistic Center entrepreneur can store imported goods or goods from other places in the Indonesian customs area for a certain period for later removal. The storing activity can be accompanied with one or more simple activities.
B. Customs and Tax Treatment
1. The following facilities are granted when goods from outside the Indonesian customs area enter into a Bonded Logistic Center:
a. postponement of import duty;
b. non-collection of Value Added Tax (VAT), Sales Tax on Luxury Goods and Article 22 income tax on import; and
c. exemption from excise duty.
2. The following facilities are granted when goods from other Bonded Logistic Centers enter into a Bonded Logistic Center:
a. postponement of import duty;
b. non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import;
c. exemption from excise duty; and
d. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
3. The following facilities are granted when goods from Bonded Storage Places other than a Bonded Logistic Center enter into a Bonded Logistic Center:
a. for goods which originate from outside the Indonesian customs:
1. postponement of import duty;
2. non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import;
3. exemption from excise duty; and
4. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
b. for goods which originate from other places in the Indonesian customs area:
1. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
4. The following facilities are granted when goods from Special Economic Zones, Free Trade Areas or other economic zones designated by the government enter into a Bonded Logistic Center:
a. for goods which originate outside the Indonesian customs area:
1. postponement of import duty;
2. non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import;
3. exemption from excise duty; and
4. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
b. for goods which originate from other places in the Indonesian customs area:
1. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
5. The entry of goods from other places in the Indonesian customs area into a Bonded Logistic Center where the goods are intended for export is granted non-collection of VAT or VAT and Sales Tax on Luxury Goods.
6. The following facilities are granted when a party enjoying custom/tax facilities moves goods from other places in the Indonesian customs area which originate from outside the Indonesian customs area into a Bonded Logistic Center for certain purposes:
a. postponement of import duty;
b. non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import;
c. exemption from excise duty; and
d. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
The following facilities are granted when a party enjoying custom/tax facilities moves goods from other places in the Indonesian customs area which originate from outside the Indonesian customs area into a Bonded Logistic Center for certain purposes:
a. postponement of import duty;
b. non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import;
c. exemption from excise duty; and
d. non-collection of VAT or VAT and Sales Tax on Luxury Goods.
The goods referred to in 1, 2, 3 and 4 above are not for consumption in the Bonded Logistic Center.
C. Bonded Logistic Center Operator
1. The designation of a place as a Bonded Logistic Center and the issuance of a Bonded Logistic Center operator license for a certain period is stipulated by a Minister of Finance Decree.
2. To be designated as a Bonded Logistic Center and to obtain a license as a Bonded Logistic Center operator, a Bonded Logistic Center operator must fulfil the following requirements:
a. has evidence of ownership or possession of a zone, place or building that has clear boundaries, including a map of the location/place and layout plan/sketch of the place that will be used as the Bonded Logistic Center;
b. has a Business Location License (Surat Izin Tempat Usaha), environmental documents and other licenses that are required by the relevant technical agencies; and
c. has registered its business to be designated as Taxable Entrepreneur and has submitted the most recent Annual Income Corporate Tax , if required to do so.
D. Bonded Logistic Center Entrepreneur
To be licensed as a Bonded Logistic Center entrepreneur, an entrepreneur must fulfil the following requirements:
a. has evidence of ownership or possession of a place or building that has clear boundaries, including a map of the location/place and layout plan/sketch;
b. has a Business Trading License (Surat Izin Usaha Perdagangan) and other licenses that are required by the relevant technical agencies; and
c. has registered its business to be designated as a Taxable Entrepreneur and has submitted the most recent Annual Income Corporate Tax return, if required to do so.
E. Release of Goods from a Bonded Logistic Center
Imported goods stored in a Bonded Logistic Center may be released to:
a. support industrial activities at a Bonded Zone, Special Economic Zone, Free Trade Area and other economic zones designated by the government;
b. support industrial activities in another Indonesian customs area;
c. be placed into another Bonded Logistic Center, Bonded Warehouse and/or Duty Free Shops;
d. be exported;
e. support industrial activities which obtain the facility of import duty exemption; non-collection of VAT Sales Tax on Luxury Goods and Article 22 income tax on import; and refund of import duty pursuant to the prevailing laws and regulations on customs.
f. support industrial activities which obtain import duty facilities borne by the government.
III. Major Changes
Regulation 85 also introduces the following changes:
1. Regulation 85 makes a slight change to the definition of Bonded Zone. Previously, a Bonded Zone was defined as a Bonded Storage Place to store imported goods and/or goods originating from other places in the Indonesian customs area to be processed or combined, with its output primarily for export purposes. Under Regulation 85, a Bonded Zone is now defined as a Bonded Storage Place to store imported goods and/or goods originating from other places in the Indonesian customs area to be processed or combined before being exported or imported for use.
2. Regulation 85 adds Special Economic Zones and Free Trade Areas as places of entry and release of goods to or from a Bonded Storage Place.
3. Goods entering a Bonded Warehouse, a Bonded Zone, a Bonded Exhibition Area, a Duty Free Shop and a Bonded Auction Place from outside the Indonesian customs area are now exempted from duty & excise. Previously, such goods were only entitled to import duty postponement and non-collection of VAT, Sales Tax on Luxury Goods and Article 22 income tax on import.
4. A duty free shop can now be located in the arrival terminal of an international airport in the Indonesian customs area. Previously, (in theory although not always been implemented consistently) a duty free shop could only be located in:
a. a departure terminal of an international airport in the Indonesian customs area;
b. a main seaport in the Indonesian customs area ;
c. a transit place in the departure terminal of an international airport which is a special place for overseas destined transiting passengers in the Indonesian customs area;
d. a main seaport which is a special place for overseas destined transiting passengers in the Indonesian customs area; and
e. cities.
Regulation 85 also adds the following new provisions:
1. Bonded Storage Place entrepreneurs are required to record the entry and release of goods by using a computer based information system.
2. The entry of goods originating from outside the Indonesian customs area to a Bonded Storage Place is not subject to import restrictions unless stated otherwise by the prevailing laws and regulations.
3. The release from a Bonded Storage Place of goods originating from outside the Indonesian customs area to be imported for use in another place in the Indonesian customs area is subject to import restrictions.
IV. Differences between a Bonded Logistic Center, a Bonded Warehouse and a Bonded Zone
At the surface, a Bonded Logistic Center may seem similar to a Bonded Warehouse and one may question the differences between the two. The concept of a Bonded Logistics Center was introduce to expand the function of a Bonded Warehouse. A Bonded Warehouse itself is defined as a Bonded Storage Place to store imported goods, which may be accompanied with one or more activities such as packaging/re-packaging, sorting, kitting, packing, adjusting or cutting of certain goods within a certain period for later removal. As you can see from the definition, packaging and other related activities may be conducted in a Bonded Warehouse. The function of a Bonded Logistic Center on the other hand is purely for storing imported or domestic goods for later removal.
We set out below 2 main advantages of a Bonded Logistic Center compared to a Bonded Warehouse:
1. Under the prevailing regulation on Bonded Warehouse, imported goods can be deposited in a Bonded Warehouse for a limited period of 1 year only as of the date of notice of import customs. Although Regulation 85 does not specify any time limit for storing goods in a Bonded Logistic Center, however, it is suggested from various publications that the government will impose a time period longer to that of a Bonded Warehouse. This, however, remains to be seen once an implementing regulation on Bonded Logistic Center is issued by the government.
2. A Bonded Warehouse can only store imported goods and is prohibited from storing goods from other areas. A Bonded Logistic Center, on the other hand, may store both imported goods and goods from other places in the Indonesian customs area. As such, the sources of materials which can be stored in a Bonded Warehouse does not necessarily need to originate from import but may originate from the Indonesian customs area as well.
As to the differences between a Bonded Logistic Center and a Bonded Zone, the most noticeable differences is that goods entering a Bonded Zone must be processed or combined. In other words, there must be some kind of an industrial activity in a Bonded Zone. While in a Bonded Logistic Center, there is no need for the goods to undergo any processing or combination activities.
V. Conclusion
Regulation 85 came into force on 25 November 2015. The introduction of a regulatory framework for Bonded Logistic Centers in Indonesia is crucial to reducing logistics costs in Indonesia, which have long been among the highest in the region due to poor transportation infrastructure. Businesses will likely welcome this breakthrough as companies setting up operations in Bonded Logistics Centers may enjoy a number of taxation facilities, i.e., they will be allowed to postpone import duty payment and be exempted from VAT, Sales Tax on Luxury Goods and excise duty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
