Indonesia CB asks importers to report forex for overseas deals

Indonesia’s central bank (CB) announced new regulations requiring importers to report how much foreign currency they use for overseas purchases from next year, in a move to step up monitoring of money flows.

All importers buying oversees goods worth at least $10,000 will have to report their transactions to Bank Indonesia (BI) from Jan.1, 2020, the central bank said.

Bank Indonesia has since 2012 ordered exporters to receive their earnings through local banks, hoping that some of the funds would be kept onshore to increase domestic savings and make the rupiah currency less volatile.

Under the new regulations, BI argues that foreign exchange (forex) flows are instrumental in the rupiah’s stability and it needs data on import payments, not just on export earnings.

Failure to comply could lead to a suspension of import processing by the customs office, though this would only apply from 2021.

The regulation also orders exporters to report earnings online, directly to BI, instead of to the bank holding their earnings.

Ade Sudrajat, chairman of the Indonesia Textile Association, said BI was making too many rules and should already be able to obtain information on FX flows from commercial banks.

“Each agency makes rules and it’s a headache for business,” Sudrajat said by telephone.

Under the new rules, exporters of natural resources must place their earnings in a special bank account.

Exporters looking to move the funds out of the account would have to provide a document to the bank that showed the transfer was for specific transactions such as imports, debt payments, royalties, dividends or salaries, it said.

The rules on resources earnings take effect on Jan. 1, 2021 and reinforce a similar regulation issued by the government in January stating that revenues from shipments of resources from the mining, plantation, forestry or fishery sectors must be kept in a special bank account.

Indonesia is the world’s largest exporter of palm oil. It is also a major exporter of coal and minerals such as nickel ore.

The rules that were introduced in January were brought in after the rupiah hit its weakest level since the 1998 Asian financial crisis last year, pressured by rising US interest rates, the US-China trade war and a wider Indonesian current account deficit.

The rupiah has been less volatile in 2019 and is up nearly 2% so far this year against the dollar.

With inflation also benign, BI has cut interest rates four times since July, partly unwinding rate hikes last year to shore up the currency.

Indonesia has said that overseas companies that have a significant presence in its booming Internet economy must appoint a representative in the country and pay all applicable taxes, according to a new regulation made public on Wednesday.

Indonesia’s Internet economy is the largest and fastest-growing in the region, on track to cross the $130 billion mark by 2025, according to an October report by Google, Singapore state investor Temasek Holdings and global business consultants Bain & Company.

The new regulation, effective immediately after it was passed on Nov.25, calls for foreign-based companies that actively trade in goods or services electronically in Indonesia to be considered as equal to having a physical presence in the country and thus, must follow all tax rules accordingly, a copy of the regulation obtained by Reuters showed.

This applies to all companies that meet certain criteria, including generating significant traffic from Indonesia or reaching a certain number of transactions in value or in volume, according to the regulation. No details were given.

Such companies will be required to appoint a representative within Indonesia’s jurisdiction who can act on its behalf, it said.

“This was designed to create a fair, if we can’t have a level, playing field,” said Susiwijono Mugiharso, secretary of the economic affairs ministry.

“All this time we have only been a market. But now, if they are actively capitalising on our market, they must also be present here,” he said.

Finance Minister Sri Mulyani Indrawati said on Nov.22 she would file a bill in parliament this month that would allow authorities to recognise any big internet company with significant economic presence as an Indonesian tax resident, who must pay value added and corporate taxes.

Indonesia’s e-commerce association also welcomed the measure, describing the move as fair to local players, its chairman Ignatius Untung said.

“The old tax rules are no longer relevant in the current conditions,” Untung said.

Reuters