Principles and main methods of transfer pricing investigation | Indonesian Tax Guide 2025 (45)-熊猫出海

Principles and main methods of transfer pricing investigation | Indonesian Tax Guide 2025 (45)

Indonesia Transfer pricing method 2025-03-18 09:05:12 Page view：313

This issue's introduction

Principles and main methods of transfer pricing investigation

Chapter 10

Special Tax Adjustment Policy

in principle

When enterprises have related relationships, there is a possibility that income or expenses are underestimated or exaggerated, resulting in a reduction in taxable income.

In this case, the tax bureau has the right to make special tax adjustments based on reasonable methods to ensure that the related transactions of enterprises comply with the principle of independent transactions.

Main transfer pricing methods

Transfer pricing methods include the comparable uncontrolled price method, the resale price method, the cost plus method, the transactional net profit method, the profit split method, the comparable uncontrolled transaction method, the tangible and intangible asset valuation method, the business valuation method and other methods that comply with the arm's length principle.

The comparable uncontrolled price method uses the price charged for the same or similar business activities between unrelated parties as the arm's length transaction price of related-party transactions.

The resale price method uses the price at which the related party purchases the goods and resells them to the unrelated party minus the gross profit of comparable unrelated transactions as the arm's length transaction price of the goods purchased by the related party.

The cost plus method uses the reasonable cost incurred in the related-party transaction plus the gross profit of comparable unrelated transactions as the arm's length transaction price of the related-party transaction.

The transactional net profit method uses the profit margin indicators of comparable unrelated transactions to determine the net profit of related-party transactions. Profit margin indicators include return on assets, sales profit margin, full cost markup rate Berry ratio, etc.

The profit split method calculates the amount of profit that each should distribute based on the contribution of the enterprise and its related parties to the combined profit of related-party transactions. The Ministry of Finance Regulation No. 79 of 2023, issued in 2023, contains guidelines on the valuation procedures for tangible assets, intangible assets and businesses.

Although the relevant regulations recognize other transfer pricing methods that comply with the arm's length principle, only the above five transfer pricing methods can be selected when making corporate income tax returns and disclosures, namely: comparable uncontrolled price method, resale price method, cost plus method, transactional net profit method, and profit split method.

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