Transfer Pricing in Indonesia in A Nutshell
What is Transfer Pricing?
Transfer pricing is a method that sets the price for transaction and transfer between related parties, which can be between a company and a company or a company and an individual. The arm’s length principle must be implemented as the standard of transfer pricing method.
Transfer Pricing Documentation
In accordance with PMK-2132016 issued by the Minister of Finance of Indonesia, every affiliated transaction, both local and international, is required to provide documentation known as TP Doc.
It is mandatory for taxpayers to maintain 3-tier documentation, namely Master File, Local File (both must be made available within 4 months after fiscal year end) and Country-by-Country Report (CbCR). All of them have to be submitted in Bahasa Indonesia.
In general, transactions that satisfy any of the following criteria are required to prepare the TP Doc:
- Gross Revenue in preceding year exceeding IDR 50 billion
- Services, Royalties Interest or other transactions in preceding year exceeding IDR 5 billion
- Tangible goods transactions in preceding year exceeding IDR 20 billion
- Related party transactions with affiliated entity located in a jurisdiction with tax rate lower than Indonesia
Failure to be in compliance with transfer pricing policies and procedures in Indonesia as well as providing the required documentation may result in costly transfer pricing audits, let alone significant amount of additional tax liabilities and penalties.
Transfer Pricing with Cekindo
Cekindo’s transfer pricing services in Indonesia are designed to comply with Indonesian statutory requirements and international practice while at the same time being tailored to your business needs.
Fill in the form below to learn more about Cekindo’s transfer pricing services.
Our consultants are also available offline. Visit us in one of our offices in Jakarta, Bali and Semarang and we will be happy to answer your questions.