The Minister of Communication and Information has announced that the ministry will issue new regulations to providers of mobile application/internet content providers. This proposed regulation will cover the following:
a. Compliance with existing laws:
Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition
Law No. 7 of 2014 on Trade
Law No. 8 of 1999 on Consumer Protection
Intellectual property rights.
b. Filtering of content in accordance with Law No. 44 of 2008 on Pornography, and related government regulations.
c. Censoring of negative content under Minister of Communication and Information Regulation No. 19 of 2014 on Controlling Internet Websites Containing Negative Content.
d. Use of Indonesian legal entities for receiving payment through “national payment gateway”.
e. Use of Indonesian Internet Protocol (IP) addresses.
This latest attempt to regulate internet operators is believed to help with tax revenue collection that is targeted at payment flow to internet businesses outside Indonesia. Indirectly it also seeks to localize online operations.
The regulation is likely to impact foreign-based websites which receive payments from Indonesian users. The major global internet companies maintain limited local presences in Indonesia, with activities limited to marketing. A common excuse from internet businesses is their lack of legal certainty when not establishing important business functions in Indonesia, such as payment processing.
These businesses often use Singapore to process payments. Businesses must comply with proposed requirements for receiving payment within Indonesia, therefore the tax authority will be in a better position to trace and audit such receipts which previously were channeled out of Indonesia. This is why, it is recommended to registering a business or applying trademark Indonesia, before business owners having problems with Indonesian authorities.
Previous attempts to regulate internet businesses did not progress very far. In 2014, the government issued a set of draft regulations to regulate internet operators. Businesses opposed these draft regulations because of overly prescriptive rules such as the need for certification, registration and locating of data centers in Indonesia. As a result, these regulations never passed.
Online businesses will need to monitor the language of the latest proposed draft regulations once issued to better understand their impact.