This document summarizes the transfer pricing requirements and regulations in Indonesia. Indonesia follows the OECD Transfer Pricing Guidelines to establish its transfer pricing policy and resolve disputes. The country has a legal framework consisting of various regulations that require taxpayers to maintain transfer pricing documentation. The rules apply to domestic and cross-border related party transactions and encompass master files, local files, and Country-by-Country Reports (CbCR). Indonesia’s Advance Pricing Agreement (APA) framework allows for three-year APA terms and rollbacks. A tax audit priority list includes indicators that lead to transfer pricing audits, and there are penalties for late payment or underpayment of taxes found during such audits.
Indonesia’s approach to transfer pricing adheres to the OECD Transfer Pricing Guidelines. The legal framework includes various regulations:
Indonesia’s transfer pricing rules apply to both domestic and cross-border transactions between parties with a “special relationship.” A “related party” is defined in Article 18, which includes ownership relationships, control, and family relationships.
Transfer pricing documentation in Indonesia aligns with the OECD Guidelines. It mandates the provision of a Master File, a Local File, and Country-by-Country Reporting (CbCR).
Indonesia does not maintain a list of tax havens.
Indonesia’s APA framework allows for three-year terms, including rollbacks if prior years are not under audit. Renewal can be done in the last fiscal year of the APA enactment. There is no fee for an APA application, and disclosures in the master file are required.
The Directorate General of Tax (DGT) follows a tax audit priority list for transfer pricing concerns. Various indicators lead to such audits, including transactions with low effective tax rates, business schemes with no economic substance, significant affiliate transactions, and corporate restructuring events. Financial underperformance compared to the industry and repeated losses can also trigger audits.
Transfer pricing regulations in Indonesia encompass local files, master files, and CbCR under PMK-213. These apply to companies with specific revenue thresholds and transactions with entities in lower-tax jurisdictions.
Indonesia accepts several methods, including Comparable Uncontrolled Price (CUP), Resale Price Method, Cost Plus Method, Profit Split Method, and Transactional Net Margin Method (TNMM). The selection is based on available comparable data and facts.
Benchmark studies are considered crucial for determining arm’s length prices. Both internal and external comparables are used, and a range-based approach is employed based on the number of comparables available.
Legal agreements formalizing relationships between group entities have lower significance since the 2017 OECD Guidelines emphasize the “conduct of parties.”
The document’s language is Indonesian. Upon request, transfer pricing reports (except CbCR) must be submitted per relevant tax laws.
While Indonesia does not have specific rules, it generally requires documentation retention for up to 10 years.
Corporate income tax returns must include local, master files, and CbCR notifications. Failure to do so results in fines, and there are general penalties for late payment or underpayment discovered during transfer pricing audits. These can include fines and imprisonment in severe cases.
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