Set Pricing for Indonesia Entry with Benchmark Analysis

A benchmark analysis helps companies entering Indonesia determine whether proposed prices, margins, or returns for related-party transactions are consistent with the arm’s-length principle under PMK 172/2023. This can apply to goods, service fees, intellectual property (IP), financing, and distribution activities. 

Setting up the pricing approach early gives companies a clearer basis for related-party transactions and reduces the risk of having to revise their pricing after operations begin. 

Key Takeaways

• Benchmark analysis helps set reasonable pricing early, before related-party transactions begin in Indonesia. 
• PMK 172/2023 requires arm’s-length pricing, supported by comparable independent data where relevant. 
• Benchmark analysis supports various transactions, including goods, services, financing, royalties, and distribution. 
• Arm’s-length rules still apply below TP documentation thresholds, even if a Local File is not required. 
• Starting benchmark analysis early supports future compliance, including TP documentation, monitoring, and later reviews. 

What Can Companies Benchmark Before Entering Indonesia? 

Which companies to benchmark against depends on the transaction and the Indonesian entity’s role. Under PMK 172/2023, comparable transactions should reflect relevant transaction conditions, with adjustments made where material differences affect pricing. 

Transaction	What Can Be Benchmarked
Goods	Prices, gross margins, and commercial terms
Distribution	Operating margins or other profit indicators
Manufacturing	Cost markups, margins, or returns
Services	Markups, cost bases, or service charges
Financing	Interest rates and financing terms
Intellectual property (IP)	Royalty rates and licensing terms

The analysis should first consider what the Indonesian entity does, the assets it uses, and the risks it takes. It can then be compared with similar independent companies or transactions to determine a reasonable price or return. 

Why Does Pricing Matter When Entering Indonesia? 

Multinational groups need to decide how their Indonesian entity will transact with affiliated companies, including pricing for goods and services, royalties, and financing. 

These prices affect how much profit is earned in Indonesia. Under PMK 172/2023, related-party transactions must follow the arm’s-length principle and reflect actual business conditions. 

This makes pricing an important part of market-entry planning from the start. 

READ MORE:

• Strengthen Tax Audit Readiness with Transfer Pricing 
• Transfer Pricing Methods in Indonesia: Guide for Multinational Businesses 
• The Role of Benchmarking Analysis in Transfer Pricing Documentation 

How Does Benchmark Analysis Support Pricing? 

Benchmark analysis helps companies set up a reasonable pricing position before related-party transactions begin. 

Instead of relying solely on internal targets, companies can compare their proposed pricing with that of similar independent businesses or transactions. It can help companies: 

• Set an arm’s-length range using comparable market data. 
• Match returns with the local entity’s role and responsibilities. 
• Test global pricing policies before applying them in Indonesia. 
• Support the selected transfer pricing method with comparable data. 
• Monitor actual results once operations begin. 

Under PMK 172/2023, an arm’s-length result may be expressed as a single point or a range.  

Conducting the analysis early also helps identify pricing issues before transactions accumulate and provides a reference point for monitoring future margins or returns. 

When Does Pricing Become a Transfer Pricing Issue? 

Once an Indonesian entity transacts with its parent or other affiliated companies, the pricing becomes subject to Indonesia’s transfer pricing rules. 

PMK 172/2023 requires related-party transactions to follow the arm’s-length principle. Benchmarking can help determine whether the prices, margins, or returns used are reasonable relative to independent transactions. 

If actual results differ significantly from the benchmark, a transfer pricing review can help identify the cause and determine whether a pricing change or adjustment is needed. 

How Does Benchmark Analysis Support TP Documentation? 

A benchmark analysis provides market evidence to support the prices, margins, or returns used in related-party transactions. This can later be included in the company’s transfer pricing documentation for economic analysis. 

Under PMK 172/2023, Master File and Local File requirements generally apply when the preceding fiscal year includes: 

• Gross turnover above IDR 50 billion 
• Related-party tangible goods transactions above IDR 20 billion 
• Related-party services, interest, intangibles, or other transactions above IDR 5 billion per category 
• Transactions with affiliates in jurisdictions with a lower income tax rate than Indonesia 

The Master File and Local File must generally be available within four months after the end of the fiscal year.  

Even below these thresholds, related-party transactions must still follow the arm’s-length principle. 

For companies entering Indonesia, an early benchmark analysis provides a stronger foundation for future TP documentation, avoiding the need to rebuild the pricing rationale later. 

How Can InCorp Support Benchmark Analysis for Market Entry? 

InCorp Indonesia (an Ascentium Company) supports businesses in setting up and maintaining a defensible transfer pricing position in Indonesia. Our support includes: 

• Benchmark Analysis and Pricing Support: Assess comparable data, arm’s-length ranges, and pricing positions. 
• Transfer Pricing Review: Evaluate related party transactions, functions, risks, and actual financial results. 
• TP Documentation and Compliance: Prepare Master File, Local File, and supporting analysis. 
• Tax Audit and Dispute Support: Assist with transfer pricing questions and tax authority scrutiny. 

Our transfer pricing advisors bring years of experience and include TP Catalyst-certified professionals supporting benchmark analysis, transfer pricing strategy, documentation, and compliance in Indonesia. 

Entering Indonesia with related-party transactions? Start with a benchmark analysis to support your pricing and future transfer pricing compliance. Fill out the form below. 

Frequently Asked Questions