The Role of Benchmarking Analysis in Transfer Pricing Documentation

Benchmarking analysis is vital for companies to demonstrate their commitment to accurate transfer pricing, making them feel responsible and valued in maintaining compliance in Indonesia. 

Beyond compliance, benchmarking supports a consistent transfer pricing policy, improves decision-making across jurisdictions, and strengthens audit readiness as Indonesia’s transfer pricing environment becomes more detailed and data-driven. 

What is Benchmarking Analysis in Transfer Pricing? 

Benchmarking analysis assesses whether related-party prices or margins fall within a range that independent companies would accept. Since transfer pricing affects how profits are allocated across countries, this comparison is necessary to show arm’s-length behavior. 

In Indonesia, benchmarking is a key element of the Local File. By reviewing the financial results of comparable companies or transactions, businesses establish a factual basis for determining or supporting transfer prices that comply with OECD guidance and Indonesia’s PMK-172/2023.

Why Benchmarking Analysis is Important to Transfer Pricing Documentation 

Benchmarking strengthens transfer pricing documentation by providing objective evidence rather than relying on internal assumptions. Several elements highlight its importance: 

• Finding Relevant Comparables: Benchmarking identifies independent companies or transactions that closely resemble the taxpayer’s controlled activity, forming the foundation of arm’s-length testing. 
• Using Reliable Market Data: Access to trusted financial databases and industry sources ensures that conclusions reflect actual conditions affecting the taxpayer’s sector. 
• Supporting Clear Documentation: Benchmarking results integrate directly into the TP Doc, providing a transparent, traceable basis for explaining pricing decisions. 
• Maintaining Cross-Border Consistency: A unified benchmarking approach allows multinational groups to maintain coherent transfer pricing positions across jurisdictions, including Indonesia. 
• Strengthening Audit Readiness: A well-supported benchmark helps companies explain and defend their transfer pricing outcomes during reviews, assessments, or disputes. 

When Does a Company Need to Perform a Benchmarking Analysis? 

In Indonesia, benchmarking analysis is essential for accurate transfer pricing documentation. Although PMK-172/2023 does not specify exact update intervals, understanding key moments, such as during audits or when financial conditions change, helps companies stay compliant and focused. 

Below are the key moments when Indonesian taxpayers should conduct or refresh a benchmarking analysis: 

• Every Three Years with A Full Update: Indonesia does not legally require a three-year cycle, but this is widely accepted and often expected by auditors when conditions remain stable. 
• Annually, with an Update Comparable Financials: Even if the comparable set remains appropriate, financial data should be refreshed annually to reflect current market conditions and support the annual TP Doc. 
• During Audits or Disputes: Updated benchmarking strengthens a taxpayer’s position in assessments or disputes. 
• Part of Annual TP Documentation: Benchmarking is required in the Local File, and taxpayers typically review or refresh results each year to ensure defensibility. 

These steps help Indonesian companies maintain TP positions that are consistent, transparent, and aligned with both OECD guidance and local regulations.

Key Components of a Benchmarking Analysis 

A precise benchmarking analysis relies on several core steps that ensure the results are reliable and defensible: 

• Identify the Controlled Transactions: They involve sales, services, or licensing arrangements between related parties. 
• Assess Comparability: It evaluates whether controlled transactions align with independent transactions in functions, risks, and assets. 
• Analyze the Tested Party: This is usually the entity with simpler operations, to understand its financial and operational profile. 
• Develop a Search Strategy: Use external databases with criteria aligned with the tested party’s characteristics and regulatory expectations. 
• Select and Validate Comparables: Ensure they accurately reflect the tested party and provide reliable financial data. 
• Determine the Arm’s-Length Range: It is based on the financial results of the chosen comparables. 
• Document and Monitor the Analysis: Maintain clear records and regularly revisit the benchmark to ensure compliance with evolving regulations. 

How to Do Benchmarking Analysis the Right Way 

A strong benchmarking analysis depends on accuracy, transparency, and a consistent approach. The following practices help ensure the results are defensible and aligned with expectations in Indonesia: 

• Use Clear Selection Criteria: The search process is transparent and can be reproduced during audits. 
• Validate The Most Relevant Comparables: To ensure each selected company or transaction genuinely reflects the tested party’s functions, risks, and assets. 
• Use Up-to-Date Market Data: To capture current economic conditions, especially in industries that change quickly. 
• Document Each Step Carefully: The methodology, reasoning, and outcomes should be understandable to auditors and internal stakeholders. 
• Align with Group-Wide TP Policies: To ensure compliance with Indonesia’s local file requirements. 

Given Indonesia’s evolving regulations, collaborating with experienced advisors can help companies feel confident and supported in maintaining compliant transfer pricing positions.

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Enhance Your Benchmarking and TP Documentation with InCorp 

Benchmarking analysis is essential for producing clear and defensible transfer pricing documentation in Indonesia. By using real market data, companies strengthen compliance, reduce audit risks, and stay aligned with OECD guidance and local rules. 

InCorp Indonesia (an Ascentium Company) can manage these requirements end-to-end, and as a TP Catalyst–certified provider, we deliver benchmarking and TP documentation that meets international standards: 

• Benchmarking Studies & TP Documentation aligned with OECD and Indonesian rules. 
• Benchmark Reviews & Compliance Updates to keep TP positions up to date. 
• Audit Support & TP Policy Development tailored to the business. 

Fill out the form below to maintain consistent, defendable transfer pricing positions while easing the administrative burden on internal teams.

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