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Indonesia: New Guidance for Transfer Pricing Audit Procedures
Cindy Kikhonia Febby, S.Sos., DANNY DARUSSALAM Tax Center.

he new guidance which came special transaction such as transfer
into force from July 1, 2013 pricing for intra group services, transfer
Tprovides more clarity to the pricing for intangible and interest
Indonesian taxpayer on transfer pricing payment.
audit process as well as additional PER-22 specifically states several
information that taxpayers should keep points that Indonesian taxpayers should
ready when preparing and entering into consider, these points are as follows:
transfer pricing audit. However, certain - Detailed additional information
information such as those relating that will be required to be provided
to supply chain management can be during a transfer pricing audit;
FKDOOHQJLQJ DV WKH WD[SD\HU PD\ ÀQG LW - Providing the information on
GLIÀFXOW WR JHW GHWDLOV RQ EURDGHU JURXS the supply chain relevant to
information. the taxpayer’s business and the
profitability of each of the entities
On May 30th, 2013, Indonesia’s (including foreign related parties)
Director General of Taxes (DGT) participating in the supply chain;
commenced new Guidelines for Audits - Shorter timelines to provide
of Taxpayers with Special Relationships information on audit assesment (7
which cover in PER-22/PJ/2013 days); This new regulation provides more
(hereinafter: PER-22). PER-22 replaces - The use of profit split method; detailed guidance for Indonesian
the previous guidance commenced by - Increased focus on thin taxpayers on the transfer pricing
the DGT in 1993 with respect to transfer capitalization (debt to equity audit process as well as additional
pricing audits (Decree of the Directorate ratios); requirements that taxpayers need to
General of Taxes number KEP-01/ - Use of segmented financial data; consider when preparing for and entering
PJ.07/1993).The implementation date for and into a transfer pricing audit. However, the
this new regulation is July 1st, 2013. - The use of additional financial form relating to supply chain management
PER-22 is divided into four chapters ratios (profit level indicators). can be challenging for taxpayers. In this
i.e. first chapter, provides guidance form, taxpayers are required to identify
in respect of the international trading PER-22 requires six forms to be the value chain for their business, the
situation of multinational companies completed by taxpayers and provided to name of companies (whether located
and how the affiliated transaction will the Tax Auditor during an audit. These in Indonesia or overseas) that perform
be audited. The second part of this forms will be required to be provided each of the functions identified in the
guidance provides that the phase of by taxpayers within seven working days value chain and the net operating profit
transfer pricing assessment is divided from the date of request by the auditor. of each of the companies performing
into two stages i.e the preparation stage The six forms are address: the functions. Indonesian taxpayers
and the implementation stage. may have difficulty in completing
This section clearly elucidate the No Form Information Required this form due to their inability to
implementation stages with the 1 Transactions with Requires the details of related access broader group information.
related parties
party transaction which comprises
detailed explanation concerning information relating to transacting Further the information on supply
parties, amount, and method used
characterization of the taxpayer (similar with Form 3A disclosure). chain may also be used by the tax
transaction, selecting transfer authorities to evaluate whether
pricing method, and how to apply 2 Segmented Requires the segmented financial profit split method can be applied
data of the taxpayer.
financial
the arm’s length principle. The statements in the case of the taxpayer.
third chapter of PER-22 outlined 3 Supply chain Requires to identifying the supply Although PER-22 has begun
the five transfer pricing method management chain for taxpayer business. to provide better guidance for
(Comparable Uncontrolled Price, 4 analysis assets This form contains the detailed Indonesian taxpayers, but it is still
Functions,
Resale Price Method, Cost Plus and risks analysis checklist relating to of taxpayer’s necessary to have more detailed
Method and Transactional Net functions performed, assets used and comprehensive information that
risks assumed.
Margin Method and Profit Split 5 Entity Concluding about the characterization will provide more certainty for the
Method) with the brief example on characterization of the taxpayer. taxpayer. IT
the application of each method. form
The fourth chapter provides 6 Comparability Requires details on the comparability
of the selected comparable
analysis form
guidance on the treatment of companies.
InsideTax | Edisi 15 | Mei-Juni 2013 7