Taxpayers conducting affiliated transactions are obliged to apply the Arm’s Length Principle. Affiliated transaction is as mentioned on article 1 of PMK 172 of 2023 (PMK 172/2023) regarding the Implementation of the Arm’s Length Principle in transactions affected by a Special Relationship is a transaction conducted by taxpayers with affiliated parties (parties that have a special relationship). The implementation of the Arm’s Length Principle will be documented in transfer pricing documentation (TP Doc) consisting of a aster file, a local file, and a country-by-country report (CbCR).
Article 34 paragraph (2), PMK 172/2023, explains that in the context of supervision or audit, taxpayers are required to submit Transfer Price Determination Documents no later than 1 month after the document request is submitted by the Directorate General of Taxes (DGT). This is an additional clause in PMK 172/2023 that is not contained in the previous provisions and aims to strengthen the need for documentation and assessment of transfer prices affected by special relationships by the provisions of laws and regulations in the field of taxation. Furthermore, the time limit for providing TP Doc is still the same as the provisions of the previous regulation, namely in PMK 213/2016. Taxpayers are required to provide master file and local file documents no later than 4 months after the end of the tax year, while for CbCR documents no later than 12 months after the end of the tax year. The criteria for determining the obligation to prepare transfer pricing documents are by Article 16 of PMK 172 of 2023, but determining the criteria for the obligation to prepare CbCR is different from the previous provision (PMK 213/2016) which was originally determined based on the gross turnover of the relevant tax year to be based on the gross turnover of the previous tax year.
DGT in conducting compliance supervision and audit tasks has the authority to request master files and local files to taxpayers. Taxpayers will be subject to sanctions if the request for documents by the DGT is not implemented or not fulfilled. However, this is not explicitly explained in PMK 172/2023, there is no explanation of the form of sanctions borne by taxpayers if they are late or do not fulfill the availability of TP Doc requested by DGT. In contrast to the information related to sanctions, the regulation related to TP Doc is explained in more detail in PMK 172/2023, especially in terms of TP Doc requests.
If you want to have more detailed information, please contact TBrights
By Olina Rizki Arizal – Partner TBrights
TBrights is a tax consultant in Indonesia that is currently an integrated business service that provides comprehensive tax and business services.
