Legal Framework of Endorsement in Indonesia

What is Endorsement?

Endorsement or simply called as ‘endorse’, is trending among celebrity or influencer in various social media(s). However, is there any legal provisions that regulate endorsements? Is there any legal risks for those selebgrams or influencers? Is the endorsement service taxable?

First of all, of course the endorsement is based on an agreement (usually in the form of a cooperation agreement) between celebrities or influencers who are referred to as endorsers or sellers. This agreement must meet the requirements stipulated in Article 1320 of the Indonesian Civil Code (“KUHPer”), and be valid and binding on the parties as regulated in Article 1338 of the Indonesian Civil Code.

The specific thing that celebrities or influencers need to pay attention to is the suitability or originality of the endorsed item. For example, if a celebrity is endorsed to promote cosmetics, the celebrity must carefully check, whether the cosmetics have a Distribution License as regulated in Article 106 paragraph (1) of Law No. 36 of 2009 concerning Health (Health Law), if it turns out that the endorsed party continues to promote the cosmetics even though the cosmetics does not have a Distribution License, the endorsed party is at risk of being sued in a Tort Lawsuit. This risk also applies to goods or other services that a celebrity or influencer wants to promote, in essence, the goods being promoted must be valid or legal according to Indonesian law in the related field.

Referring to the Circular of the Director General of Taxes Number SE / 62 / PJ / 2013, concerning Confirmation of Tax Provisions on e-Commerce Transactions, endorsement is included in a classified ads business model.

In this case, because the celebrity or related influencer receives income from the endorsement service, he/she can be subject to PPh 21 tax if he/she acts on his/her own behalf or is not under the auspices of an agency and so on. Otherwise he will be subject to PPh 23 if the payment of the endorsement service is paid to the agency first, then passed on to the celebrity or influencer.

Suria Nataadmadja & Associates Law Firm

Advocates & Legal Consultants