APA and MAP

PMK 172 of 2023 (PMK 172/2023) became a transfer pricing guideline in Indonesia after previously the rules regarding transfer pricing were split into three Minister of Finance Regulations (PMK), including : 

PMK Number 213/PMK.03/2016 regulates the preparation of TP Doc 

PMK Number 49/PMK.03/2019 regulates the Mutual Agreement Procedure (MAP)

PMK Number 22/PMK.03/2020 regulates the PKKU and Advance Pricing Agreement (APA).

PMK 172/2023, apart from the merger of the previous regulations, also contains several new provisions as previously explained such as the time for submitting TP Doc in the context of compliance supervision and examination to 1 month, criteria in determining CbCR obligations, and so on. The additional provisions in PMK 172/2023 that will be discussed in this article are the provisions of MAP and APA. 

MAP

Based on Article 1 in the PMK of 172/2023 on the Implementation of the Arm’s Length Principle in transactions affected by a Special Relationship, what is meant by Mutual Agreement Procedure (MAP) is

“an administrative procedure stipulated in a double taxation avoidance agreement to resolve problems arising in the application of the double taxation avoidance agreement”

In article 41 paragraph 8 of PMK 172/2023, the request for the implementation of the mutual agreement procedure by the DGT was submitted to: 

  1. follow up the proposal on the request for the implementation of the mutual agreement procedure by a domestic taxpayer and or
  2. following up on the request for a bilateral or multilateral transfer pricing agreement submitted by a domestic taxpayer with the procedures for implementing the transfer pricing agreement. 

MAP is the result of an agreement obtained by the authorized official (Government of Indonesia) with the government of the partner country/partner jurisdiction related to double tax avoidance that results in Notice of Tax Underpayment Assessment (SKPB) and becomes the basis for tax collection and refund by DGT in calculating the amount of tax in Tax Return (STP). 

APA

In PMK 22/2020, the arrangements related to the procedures for the formation and implementation of transfer pricing agreements (Advance Pricing Agreement) have not been able to accommodate the latest needs for transfer pricing, and the absence of a mechanism governing the impact of APAs that apply to tax years that have already occurred, therefore with the existence of PMK 172/2023, it is expected to facilitate taxpayers in tax procedures related to Advance Pricing Agreements. In Article 1 of PMK 172/2023, what is meant by Advance Pricing Agreement (APA) is a written agreement between DGT and taxpayers or tax authorities of double taxation avoidance agreement partners concerning taxpayers within their jurisdiction to agree on the criteria for determining transfer prices in determining transfer prices and or determining fair prices or fair profits in advance.

In PMK 172/2023, taxpayers are given clarity to be able to apply APA that applies backward (Roll-back APA) so that they can correct the Annual Tax Return without incurring administrative sanctions if there is a tax underpayment. There are several conditions for being able to roll-back APA, including the existence of facts and conditions of affiliated transactions that are not materially different, the determination has not expired, the SKP has not been issued, and is not currently serving a tax crime. 

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If you want to have more detailed information, please contact TBrights

By Tommy HO – Managing Partner TBrights

TBrights is a tax consultant in Indonesia that is currently an integrated business service that provides comprehensive tax and business services.

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