All You Need to Know About Indonesia New Transfer Pricing Rules
The Indonesian transfer pricing landscape continues in turmoil, where Companies are struggling to understand and comply with the latest released regulation No. 213/PMK.03/2016 (“PMK-213”).
PMK-213 introduced BEPS Action Plan 13 in Indonesia implementing the three-tiered transfer pricing documentation approach, i.e., Master File, Local File, and Country by Country Report (“CbC Report”). PMK-213 is effective from 30 December 2016; its purpose is to strengthen the quality of transfer pricing document while promoting transparency in between tax jurisdictions.
Do I need to prepare transfer pricing documentation?
Yes, as long as you have related party transactions, you will need to prepare documents. Taxpayers with transactions between Indonesia and countries with lower tax jurisdiction (like Singapore) are particularly impacted as they will have to prepare documentation regardless of the total gross revenue and the total value of the related party transaction.
The level of documentation needed depends on whether you meet the following criteria.
If you’re saying no to all of the condition above, your company does not need to prepare a transfer pricing documentation, but still needs to apply the arm’s length principle when dealing with related parties.
What is included in Master File?
The Master File should at least include:
- Ownership structure, chart, and jurisdiction of each group company
- Business activities performed
- Possession of intangible assets
- Financial and financing activities, and
- Consolidated financial statement of ParentCo and tax information regarding related-party transactions.
What is included in Local File?
The Local File should at least include:
- Identity and business activities performed
- Information on related party and non-related party transactions
- Application of arm’s length principle
- Financial information, and
- Other non-financial events/occurrences/facts affecting price or profit level
If your company is involved in more than one business activity, then the information above should be presented separately (segmented).
What is included in CbC Report?
The CbC Report should at least include:
- Allocation of income, taxes payable and business activities for all countries or jurisdictions of each group company within or outside Indonesia, covering:
- the name of the country/jurisdiction
- gross revenue
- profit/loss before tax
- income that has been withheld/collected/self-paid, income tax payable
- registered capital
- accumulated retained earnings
- no. of permanent employees, and
- net book value of intangible assets other than cash or cash equivalents.
- List of group members for each country/jurisdiction and their business activities.
Working papers for the preparation of the CbC Report are to be attached during submission.
When is it due?
The deadline for transfer pricing documentation is tight!
Master File and Local File must be ready within four months after the end of company’s fiscal year. CbC Report must be prepared and ready within 12 months after the end of company’s fiscal year.
Contact Transfer Pricing Solutions
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