IndonesiaIndonesia

Legal ReferenceArticle 18 para. 3 of Income Tax Law Number 7 Year 2021 (in Bahasa Indonesia) concerning the fifth amendment of Law Number 7 Year 1983 and Article 2 to 13 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Legal ReferenceArticle 3 and 5 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) PER-32/PJ/2011 (Director General of Taxes Regulation No. PER-32/PJ/2011)

The OECD TPG has no direct legal force in Indonesia. It is used as an interpretative tool to supplement domestic rules. It plays a strong role in MAP, APA, and treaty-based disputes. Where local regulations (PMK-172/2023, PER-32/PJ/2011) exist, they take precedence over OECD guidance.

Legal ReferenceArticle 18 para. 4 of Income Tax Law Number 7 Year 2021 (in Bahasa Indonesia) concerning the fifth amendment of Law Number 7 Year 1983 Article 2 Paragraph 1 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) Article 1 (2) of Director General of Taxes Regulation PER-32/PJ/2011 (Director General of Taxes Regulation No. PER-32/PJ/2011)

A related party relationship exists when one party has the ability to control or influence another party, either directly or indirectly, through: 1. Ownership (Direct or Indirect Shareholding ≥ 25%) 2. Control through Management or Family Relationship 3. Special Relationship Based on Economic Dependence

Legal ReferenceThe Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) PER-32/PJ/2011 (Director General of Taxes Regulation No. PER-32/PJ/2011) OECD Transfer Pricing Guidelines (as supplementary guidance)

Indonesia explicitly prescribes five OECD-aligned TP methods (CUP, RPM, CPM, TNMM, PSM). CUP is the most preferred method, especially for commodity transactions. TNMM is the most commonly applied method in practice. Indonesia’s domestic legislation also allows the use of other methods such as: comparable uncontrolled transaction method, tangible and intangible asset valuation method, and business valuation method.

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (provided)

Legal ReferenceArticle 4 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) PER-32/PJ/2011 (Director General of Taxes Regulation No. PER-32/PJ/2011) OECD Transfer Pricing Guidelines (as supplementary guidance)

Taxpayers must select the most appropriate transfer pricing method based on the nature of the transaction, available data, and comparability. Traditional transaction-based methods (CUP, RPM, CPM) are preferred over profit-based methods (TNMM, PSM) when reliable data is available.

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (not selected)

Legal Referencethe Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) PER-32/PJ/2011 (Director General of Taxes Regulation No. PER-32/PJ/2011) Article 5 of the Government Regulation No. 15 Year 2022 Indonesia’s Transfer Pricing Audit Practices and Tax Court Cases

For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed. Domestic transfer pricing framework provides for the use of a specific method for controlled transactions involving commodities. For transactions involving coal commodities, the regulation suggests the use of quoted price.

Legal ReferenceArticle 7 Paragraph 1 and Article 8 Paragraph 3 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

The economically relevant characteristics for determining arm’s length price are: a. the contractual terms; b. the function performed, assets used, and risks assumed; c. the characteristics of products; d. the economic circumstances; and e. the business strategies.

Legal ReferenceArticle 8 Paragraph 9 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

In the event that more than one external comparables with the same level of comparability and reliability is available, the external comparables originating from the same country or jurisdiction as the tested party is selected and used as the comparables.

In existing regulation, there is no explicit restriction to the use of secret comparables. However, in practice, secret comparables are never used in the audit, litigation, or dispute settlement.

Legal ReferenceArticle 12 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Transfer Price indicator value may be in the form of arm’s length point or arm’s length range. Arm’s length range is formed from two or more comparables that have different price indicator values, either in the form of: a. Minimum to maximum value (full range), in the case of only two comparables; or b. Interquartile range (Q1-Q3), in the case of three or more comparables.

Legal ReferenceArticle 8 Paragraph 3 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Yes, if there is a difference between uncontrolled transactions and the controlled transaction being tested, an appropriate adjustment of the candidate of comparable(s) to eliminate the material impact of the difference in condition to the price is a required step in the comparability analysis.

Legal ReferenceArticle 9 Paragraph 1 and Article 13 Paragraph 3 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Yes. Indonesia follows (or largely follows) the guidance in Chapter VI of the TPG. Comparable uncontrolled transaction method and tangible asset and intangible asset valuation are the appropriate methods for transactions involving intangibles such as royalty or transfer of intangible asset.

Legal ReferenceArticle 13 Paragraph 3 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Indonesia does not have any provisions concerning HTVI at this moment. However, Indonesia uses the OECD TPG in practice when resolving tax disputes, including articles on HTVI if such transaction causes tax dispute.

Legal ReferenceArticle 8 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

At the moment, Indonesia has no laws concerning HTVI. However, any transactions involving intangible must pass preliminary stage according to Article 8 of PMK-172.

Legal ReferenceArticle 13 Paragraph 1 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Yes. Indonesia follows (or largely follows) the guidance in Chapter VII of the TPG. For special transactions involving intra-group service, proofs should be submitted regarding delivery, requirement, economic benefits, and non-duplication.

In practice, Indonesia encounters low value-adding services (LVAS) transactions in resolving international tax dispute cases and refers to the OECD TPG in the analysis. However, the regulation regarding LVAS is yet to be established.

Legal ReferenceArticle 13 para 4 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) regarding loan or borrowing cost.

Yes. Indonesia follows (or largely follows) the guidance in Chapter X of the TPG.

Legal ReferenceArticle 13 para 8 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation) regarding cost contribution agreement

Yes. Indonesia follows (or largely follows) the guidance in Chapter VIII of the TPG.

Legal ReferenceArticle 3 para (1) of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Taxpayers must maintain and retain documents (Master file, Local file, and CbCR) to support that transactions conform to the Arm's Length Principle.

• Master file consistent with Annex I to Chapter V of the TPG (selected)
• Local file consistent with Annex II to Chapter V of the TPG (selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (selected)

Legal ReferenceArticle 18 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Timing for availability: a. Masterfile and local file: 4 months after the fiscal year ended; b. CbCR: 12 months after fiscal year ended. Documentation must be in Indonesian language unless permission is obtained.

Legal ReferenceArticle 28 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

Indonesia has penalties on failure of submitting or late to submitting the CbCR on time. The penalty for not submitting the annual corporate income tax return is IDR 1 000 000. If examination results in a correction, a penalty of 50% increase may apply.

Legal ReferenceArticle 16 of the Minister of Finance Regulation Number 172 of 2023 (in unofficial English translation)

A taxpayer is exempt if: a. annual gross turnover is no more than IDR 50 billion; b. annual value of related party transaction is below certain thresholds (IDR 20 billion for goods, IDR 5 billion for services/interest/intangibles); or c. no related party transactions in low-tax jurisdictions.

Legal ReferenceIndonesia OECD MAP Profile

Rulings, Advance Pricing Agreements (Unilateral, Bilateral, Multilateral), and Mutual Agreement Procedures are available.

• Rulings (selected)
• Advance Pricing Agreements (APA) (selected)
• Mutual Agreement Procedures (selected)

Legal ReferenceTax treaties signed by Indonesia

Article 7 as it read before 2010.

• Article 7 as it read before 2010. (selected)
• Article 7 as it reads after 2010. (not selected)

Indonesia does not follow AOA for PE profit attribution in all its 71 tax treaties. Indonesia tax treaties follow the “directly attributable” approach.