Current Update of Transfer Pricing

Development and Dispute Settlement

Dwi Astuti
Directorate General of Taxes
Jakarta, 6-7 October 2020
ORGANIZATIONAL STRUCTURE
Directorate of International Taxation

Subdirectorate of Subdirectorate of Internasional

International Taxation Disputes Prevention & Settlement Taxation Disputes Prevention &
Settlement (PPSPI) is one out of three
subdirectorates under Directorate of
section PPSPI I Internasional Taxation.
(Asia-Pacific, Australia, New Zealand)
It is a dedicated unit of DGT that
section PPSPI II handles the administration and
(Japan, America) application of APA and MAP.

In conducting its works, it follows and

section PPSPI III applies recommendations of the
(South Korea, China, Hong Kong, Macau) BEPS, especially the minimum
standards of BEPS Action 14 – Making
section PPSPI IV Dispute Resolution Mechanism more
(Europe and Africa) Effective.

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ROLES AND FUNCTIONS
Subdirectorate of
International Taxation Disputes Prevention Regulation/Policies:
and Settlement Drafts and Disseminates the regulation on the
Implementation of the Arm’s Length Principle,
Advance Pricing Agreement (APA), and Mutual
Agreement Procedures (MAP).

Roles:
Disputes Prevention:
administers the materials for the review, formulation of
• Unilateral APA
policies and regulation, coordination and evaluation of
• Bilateral APA
the implementation of the policies and regulation on
• Based on the MoF Regulation No.
the international tax disputes prevention and
22/PMK.03/2020
settlement

Disputes Settlement:
• MAP
• Based on the MoF Regulation No.
49/PMK.03/2019

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Transfer Pricing Disputes Resolution
Advance Pricing Agreement Objection & Mutual Agreement Procedure
APA Appeal MAP

Disputes Prevention Disputes Settlement

• MoF Regulation No. • Article 25, 26, 27 & 27A of • MoF Regulation No.
22/PMK.03/2020 the Law 49/PMK.03/2019

• Regulation of DGT No. • Applicable regulations on • Regulation of DGT No.

17/PJ/2020 Objection and Appeal 16/PJ/2020

• Article 25 para 3 of Double • Article 25 of Double

Taxation Agreement Taxation Agreement

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Updates on Advance Pricing Agreement
Key Features of APA in Indonesia

Types of APA available

• Unilateral APA
• Bilateral APA

Key Deadlines
• Formal application must be submitted during the period of 12 months to 6 months before
the APA period started
• Supporting documents must be provided at least 2 months after DGT issues written
acknowledgement that taxpayer’s request for APA can be processed

APA Period Coverage

• Five years maximum for Bilateral and Unilateral AP

Rollback Clause
• Available for tax years before the APA periods as long as the tax year(s) has not elapsed, or
an assessment letter has not been issued for the tax year(s)
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Updates on Advance Pricing Agreement
Key Features of APA in Indonesia

Formal Requirements
• The Applicant has submitted the annual corporate income tax returns for the past 3 taxable
years prior to the taxable year of the submission of the APA application
• The Applicant has fulfilled the obligation to prepare and conduct the TP Doc for the past 3
taxable years prior to the taxable year of the submission of the APA application
• The Applicant is not being investigated or being charged for tax crime
• The affiliated transaction and the affiliated party at issue have been reported in the Applicants
annual corporate income tax returns for the past 3 taxable years prior to the taxable year of the
submission the APA application
• The APA proposal complies with the arm’s length principle and does not cause the operating
profit of the Applicant becomes smaller than the operating profit in the annual corporate
income tax returns for the past 3 taxable years prior to the taxable year of the submission of
the APA application

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Updates on Advance Pricing Agreement
Key Features of APA in Indonesia

Filing Fee
• There is no filing fee charged for APA application

Collateral Issues
DGT can disagree with taxpayer’s proposal if one of followings occurs:
• Affiliated transaction is not based on economic motives
• The economic substance of an affiliated transaction differs from its formal form
• One of the purpose of the affiliated transaction is to minimize tax burden
• The information and/or evidence submitted by the Taxpayer is incorrect or not in accordance
with the actual conditions
• Taxpayer does not respond to requests for information by the DGT within 14 days after the
date of the written request
• The tax year in the APA or Roll-back Period has been issued Tax Assessment Letter.

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Updates on Advance Pricing Agreement
Key Features of APA in Indonesia

APA Implementation
• Taxpayer must apply the APA in determining the arm’s length price of its affiliated
transaction(s)
• Taxpayer must document the application of the APA in the TP Documentation

Renewal Procedure
• A request for APA renewal must be submitted during the period of 12 months to 6 months
before the last year of an APA period
• APA renewal can be granted for 1 APA period

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Updates on Mutual Agreement Procedure
MAP Profiles of Indonesia – inline with BEPS Action 14 Minimum Standards

MAP Guidance
• Article 57 of Government Regulation Number 74 of 2011
• Minister of Finance Regulation Number 49 of 2019
• DGT Regulation Number 16 of 2020

Preventing Disputes
• Indonesia’s tax treaties contain a provision which requires CAs to endeavor to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or application of their tax
treaties
• CAs may consult together for the elimination of double taxation in cases not provided for in tax
treaties
• Indonesia provides for the rollback of APAs in appropriate case

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Updates on Mutual Agreement Procedure
MAP Profiles of Indonesia – inline with BEPS Action 14 Minimum Standards

Availability and access to MAP

• Indonesia’s tax treaties allow taxpayers to submit MAP request to the competent authority of
the state in which they are resident. Indonesia has notified its position to its treaty partners
• Indonesia provides access to MAP request for transfer pricing cases and other cases related to
the application of treaty/domestic law anti-abuse provision
• MAP request must be submitted within the time limit as stipulated in tax treaty or no later than
3 years (if not stipulated) from first notification
• Indonesia’s MAP profile, statistics, rules and guidelines are published on the website of OECD
and Indonesia’s tax administration (i.e. DGT) at https://www.pajak.go.id/apa-map

Filing Fee
• There is no filing fee charged for MAP application

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Updates on Mutual Agreement Procedure
MAP Profiles of Indonesia – inline with BEPS Action 14 Minimum Standards

Resolution of MAP cases

• Indonesia is committed to resolve MAP cases within an average time frame of 24 months
• Dedicated MAP division under Directorate of International Taxation, DGT
• MAP division, separated from Tax Audit division, has sufficient number of personnel (40
persons) and authority to resolve MAP cases in accordance with the terms of the applicable tax
treaty
• Key Performance Indicators for MAP division is not based on the amount of sustained audit
adjustments or how much tax revenue is maintained
• Indonesia made reservation not to adopt para 5 of Article 25 (MAP arbitration) in its tax
treaties

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Updates on Mutual Agreement Procedure
MAP Profiles of Indonesia – inline with BEPS Action 14 Minimum Standards

Implementation of MAP agreements

• Any agreement reached in MAP discussions will be implemented notwithstanding any time
limits in domestic law

MAP and Domestic Remedies

• MAP and domestic dispute settlements (objection and/or tax appeal) may run simultaneously
(MAP does not forbid taxpayer to have access to domestic remedies)
• However, if the dispute has been adjudicated by the tax court and MAP negotiation has not
resulted in a mutual agreement, DGT may be bound by the tax court decision in the MAP
negotiation process

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APA – MAP Transfer Pricing Statistics

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Thank You

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