How to Know if you are Required by the Tax Office (Directorate General of Taxes) to Make a Transfer Pricing Documentation in Indonesia

You or your company may be a multinational or group of  companies and thriving in business with the affiliates or parties, but did you know that there are mandatory rules and regulations regarding to Transfer Pricing Documentation?. Based on the Ministry of Finance Regulation Number PMK-213/PMK.03/2016, there are types of documents and information that is mandatory to be stored by taxpayers who make transactions with parties that have special relationships and management procedures.

These types of document and information are as follows:

  1. Master File (Dokumen Induk);
  2. Local File (Dokumen Lokal); and
  3. Country by Country Report/CbCr (Laporan per Negara).

Hence, how would you know if it is or osn’t mandatory for your company? See the chart below for your guidance based on the Ministry of Finance Regulation as follows:

After fulfilling the above requirements and obligated to make a Transfer Pricing Documentation, there are obligations to organize and file the Transfer Pricing Documentations:

  1. Master File

With an ex-ante principle, it is based on the data and information available at the time of the transaction. If this approach is not undertaken, then it is not considered to apply to the principle of fairness and reasonable business practice (arm’s length principle). As the contemporaneous approach, the Master File Documentation must be available no later than 4 months after the end of the tax year and ready to be submitted to the tax office whenever required by tax officials. This document must be attached with a statement regarding the time of availability of the document and signed by the party who provided the document.

  1. Local File

With an ex-ante principle, it is based on data and information available at the time of the transaction. Similar to the Master File Document, should this approach considered in the local file, then the document will not be considered to apply to the principle of fairness and reasonable business practice (arm’s length principle). As the contemporaneous approach, the Local File Documentation must be available no later than 4 months after the end of the tax year. As the Master File, this document has to be submitted at any time  depending on the request by the tax officers. This document must also be attached with a statement regarding the time of availability of the document and signed by the party who provided the document.

  1. CbCr

This document is made based on the available data and information by the end of the book year. This document must be available no later than 12 months after the end of the tax year.

By: Olina Rizki Arizal

TBrights | Partner

 

 

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