Page 6 - Newsletter (Taxation Policies to Counter the Threat of Economic Recession and the Issuance of APA Implementing Regulation)

DDTC Newsletter Vol.03 | No.07 I April 2020 Page 6 of 9

Taxation Policies to Counter the Threat of Economic
Recession and the Issuance of APA Implementing Regulation

Article 26 Income Tax Return and Article 4 paragraph (2) APA is a written agreement between the Director General
Final Withholding Tax Return Due on 20 February 2020 of Taxes and the taxpayer or between the Director General
(KEP-158/PJ/2020). of Taxes and the tax authorities of the government of the
Tax Treaty partner that involves taxpayers. The written
The parties eligible for the exemption are taxpayers that
agreement outlines the criteria in transfer pricing and/
have been required to submit Periodic Article 21/26
Income Tax Return and Periodic Article 4 Paragraph (2) or determining the arm’s length price or arm’s length in
Final Withholding Tax Return through e-filing. On the advance. Transfer pricing refers to the prices in controlled
due date, 20 February 2020, however, the taxpayer was transactions.
not able to file the periodic tax return via the DGT Online
Resident taxpayers may submit APA requests to the
page.
Director General of Taxes on controlled transactions
The taxpayer subsequently filed the Periodic Article based on two matters. First, the taxpayer’s initiative, in
21/26 Income Tax Return and/or Periodic Article 4 the form of a request for a unilateral APA or bilateral APA.
Paragraph (2) Final Withholding Tax Return for the Second, a written notification from the Director General
January 2020 tax period on 21 February to 28 February of Taxes in connection with the request for a bilateral APA
2020 through e-Filing, direct method, postal services prelodged by non-resident taxpayers to the competent
with proof of postage, forwarding company or courier authority of the Tax Treaty.
service with proof of postage.
APA may cover all or part of controlled transactions
This implies that the taxpayer has actually exceeded
during the APA period and roll-back in the event that the
the deadline for the filing of the periodic tax returns.
taxpayer requests a roll-back in the APA request. Roll-back
Therefore, for the late filings, administrative sanctions in
is the implementation of the agreement in APA for the tax
the form of fines as referred to in Article 7 paragraph (1)
years prior to the APA period. Controlled transactions
of Law Number 16 of 2009 concerning General Provisions
may be in the form of controlled transactions between
and Tax Procedures are not imposed (Law No.16/2009).
the taxpayer and another resident taxpayer and/or a
With the exemption from sanctions, the DGT is not non-resident taxpayer.
required to issue the Notice of Tax Collection (surat
Roll-back applies to the tax year if the following
tagihan pajak/STP). If the DGT, however, has already
requirements are met. First, the facts and conditions of
issued the Notice of Tax Collection, the Head of the DGT
condition transactions do not differ materially from the
Regional Office shall revoke the administrative sanctions.
facts and conditions of affiliated transactions agreed upon
The regulation has come into force as of 20 March 2020.
in the APA. Second, the determination has not expired.
Third, the Notice of Tax Assessment (surat ketetapan
pajak/SKP) has not been issued for corporate income tax.
Implementing Regulation of Advance Fourth, the taxpayer is not under criminal investigation
Pricing Agreement Released or undertaking tax crime.
With regard to APA requests, the Director General of Taxes
The Ministry of Finance has issued a new regulation is authorized to make agreements with the taxpayer and
concerning the procedures for advance pricing agreement cooperate with the competent authority of the Tax Treaty
implementation. The regulation refers to the Minister of partner. The parties will determine the transaction price
Finance Regulation No. 22/PMK.03/2020 concerning between the taxpayer and related parties that shall be
the Procedures for Advance Pricing Agreement (APA) valid for a certain period.
(MoF Reg. No. 22/2020). Enacted and valid on 18 March,
APA may be prelodged in a period of 12 to 6 months prior
this regulation revokes the previous APA provisions
to the commencement of the APA period by submitting a
outlined in the Minister of Finance Regulation No. 7/
request to the tax office where the taxpayer is registered
PMK.03/2015.
using the specified form.
The underlying reason for the changes in the policies is The associated relationship is a state of dependency or
that the previous provisions do not fully comply with attachment of one party to another party. This is caused by
the minimum standards in Action Plan 14 of the OECD/ three factors, namely ownership or equity participation,
G20 Base Erosion and Profit Shifting (BEPS) Project. MoF proprietorship, or blood relations or marriage.
Reg. No. 22/2020 is aimed at improving the provisions
Moreover, the resident taxpayer may submit APA
on APA to be more effective and provide legal certainty,
requests provided that five requirements are met. First,
in particular, related to transfer pricing, procedures,
the taxpayer has fulfilled the obligation to submit the
periods, and follow-up requests for the implementation
Annual Corporate Income Tax Return 3 (three) tax years
of advance pricing agreement.