Introduction to this issue Specific requirements and contents of transfer pricing documents
Special tax adjustment policy
The Regulation requires taxpayers to prepare and submit transfer pricing documents, including proof that the affiliated enterprise transaction complies with the principle of a separate transaction. Local documents and main documents should be prepared within four months from the end of the fiscal year and submitted in accordance with the requirements of the tax bureau.
(1) the organization structure of the Group and the country or tax jurisdiction in which each member entity is located;
(2) The business activities undertaken by the Group;
(3) Intangible assets owned by the Group;
(4) The financial and financing activities of the Group;
(5) Tax information on the parent company's consolidated financial statements and related party transactions.
At the same time, according to the Indonesian Ministry of Finance regulations, the main document should also include the following information:
(1) A list of Group member entities and the business activities of each member entity;
(2) supply chain solutions, patterns, diagrams and descriptions of the most important products or services produced or provided by the Group, and products or services that account for 5% or more of the Group's total revenue;
(3) Description of the Group's overall strategy for the development, utilization and ownership of intangible assets, including the location and management of R&D facilities.
Transfer pricing documentation Local documentation should include the following information:
(1) Company profile: covering group structure, ownership structure, organizational structure and business activities;
(2) Related transactions and independent transactions of the company;
(3) The company follows the principle of independent transactions;
(4) the company's financial situation;
(5) The company's non-financial information affecting prices and profit levels.
Also, the local document should include the following information:
(1) the company's management structure, organizational structure and domestic and foreign entities and countries that have special relations with taxpayers;
(2) the operation of the company's business;
(3) the trading scheme adopted by the company;
(4) The pricing policy adopted by the Company in each of the past five years.
According to the regulations, the taxpayer must prove that it complies with the independent transaction principle, which is as follows:
(1) Comparability analysis;
(2) Select the most appropriate transfer pricing method
(3) Based on the results of comparability analysis and the selected transfer pricing method, test whether connected party transactions comply with the principle of independent transactions;
(4) Document each of the above steps in determining independent trading principles or profits to ensure compliance.
If the taxpayer carries out different types of business activities, local documents should be prepared separately according to the type of business.
Country reports on transfer pricing documents should include the following information:
(1) The country distribution of global income tax and business activities of all member entities of the multinational enterprise group to which the ultimate holding enterprise belongs, including country and regional names, total revenue, profit before tax, withholding income tax, income tax payable, registered capital, cumulative undistributed profit, number of permanent employees, and tangible assets other than cash and cash equivalents;
(2) A list of group members and principal business activities by country and tax jurisdiction. Country reports should be completed within 12 months of the end of the fiscal year. The country report should be filed together with the corporate income tax return for the next fiscal year.
(3) Ministry of Finance Regulation No. 172 of 2023 requires any member of a business group or taxpayer who has transactions with related parties to submit a notification (Notifkasi). The note contains the identity and region of the specific member of the enterprise group that submits the country report, so that the tax Administration can obtain the country report through the cross-border information exchange mechanism. If the taxpayer is a parent company or a member entity and parent company of a corporate group with a combined gross income of not less than IDR 11 trillion for the previous fiscal year, the taxpayer should submit a country report, working paper and description to the Tax Department within 12 months after the end of the fiscal year. The description should include proof of identity of the Indonesian taxpayer of the parent company, proof of identity of its Indonesian company in the non-parent group, and a description of the group's obligations to submit country reports in each country and region. Instructions must be written in Bahasa Indonesia.
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