a.

that the provisions on procedures for the implementation of advance pricing agreement have been regulated under the Minister of Finance Regulation Number 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement;

b.

that considering that the provisions on the procedures for the implementation of advance pricing agreement referred to in letter a do not fully conform to the minimum standards in Action Plan 14 of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and to improve these said provisions to be more effective and provide legal certainty, in particular, in respect of transfer pricing, procedures, periods and follow-up to applications for the implementation of advance pricing agreement, it is necessary to replace the Minister of Finance Regulation Number 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement;

c.

that based on the considerations referred to in letter a and letter b as well as to implement the provisions under Article 59 of Government Regulation Number 74 of 2011 concerning Procedures for the Exercise of Tax Rights and Fulfilment of Tax Obligations, it is necessary to enact a Minister of Finance Regulation concerning Procedures for the Implementation of Advance Pricing Agreement;

 

 

 

 

 

1.

Article 17 paragraph (3) of the 1945 Constitution of the Republic of Indonesia;

2.

Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, last amended by Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 2008 Number 133, Supplement to the State Gazette of the Republic of Indonesia Number 4893);

3.

Law Number 39 of 2008 concerning State Ministries (State Gazette of the Republic of Indonesia of 2008 Number 166, Supplement to the State Gazette of the Republic of Indonesia Number 4916);

4.

Government Regulation Number 74 of 2011 concerning Procedures for the Exercise of Tax Rights and Fulfilment of Tax Obligations (State Gazette of the Republic of Indonesia of 2011 Number 162, Supplement to the State Gazette of the Republic of Indonesia Number 5268);

 

 

 

 

 

MINISTER OF FINANCE REGULATION CONCERNING PROCEDURES FOR THE IMPLEMENTATION OF ADVANCE PRICING AGREEMENT.

 

 

 

 

 

Referred to herein this Minister of Finance Regulation:

1.

Tax Treaty, hereinafter abbreviated as P3B, is an agreement between the Government of Indonesia and the government of a tax treaty partner to prevent double taxation and tax evasion.

2.

Tax Treaty Partner, hereinafter referred to as P3B Partner, is a country or jurisdiction that is bound to the Government of Indonesia in the Tax Treaty.

3.

Mutual Agreement Procedure, hereinafter referred to as MAP, is an administrative procedure regulated in a Tax Treaty to resolve issues arising in the implementation of the Tax Treaty.

4.

Competent Authority in connection with the implementation of the MAP, hereinafter referred to as the Competent Authority, is an official in Indonesia or an official in the Tax Treaty Partner authorised to implement MAP as regulated in the Tax Treaty.

5.

Advance Pricing Agreement, hereinafter referred to as APA, is a written agreement between:

 

a.

the Director General of Taxes and a Taxpayer; or

 

b.

the Director General of Taxes and tax authorities of the Tax Treaty Partner involving the Taxpayer,

 

as referred to in Article 18 paragraph (3a) of the Law concerning Income Tax to agree upon the criteria in transfer pricing and/or determine the arm’s length price or arm’s length profit in advance.

6.

Transfer Price is the price in an independent transaction influenced by a special relationship.

7.

Decree on the Enactment of APA is a document containing an agreement between the Director General of Taxes and a resident Taxpayer concerning the criteria in Transfer Pricing and Advance Pricing according to the Arm’s Length Principle during the APA Period and Roll-back.

8.

Mutual Agreement, hereinafter referred to as Mutual Agreement, is the results agreed upon in the implementation of a Tax Treaty by the Competent Authority of the Government of Indonesia and the Competent Authority of the Tax Treaty Partner government in connection with the implemented MAP.

9.

Unilateral APA is the APA between the Director General of Taxes and a resident Taxpayer.

10.

Bilateral APA is the APA between the Competent Authority of Indonesia and the Competent Authority of a Tax Treaty Partner conducted based on the application of the resident Taxpayer.

11.

APA period is a tax year covered under the APA according to the application of a resident Taxpayer or according to Mutual Agreement no later than 5 (five) tax years after the tax year in which the application for APA is submitted

12.

Roll-back is the application of the agreement in the APA for tax years prior to the APA Period.

13.

Affiliated Party is a party that has a special relationship with one another.

14.

Controlled Transaction is a transaction conducted by a Taxpayer and a Affiliated Party.

15.

Transactions Influenced by a Special Relationship are transactions that cover:

 

a.

Controlled Transactions; and/or

 

b.

transactions conducted between unrelated parties  but the Affiliated Party of one or both the transacting parties determine the counterparty and the price of the transaction.

16.

Uncontrolled Transaction is a transaction between unrelated parties and not influenced by a special relationship.

17.

Transfer Pricing, hereinafter referred to as Transfer Pricing, is the determination of prices in an independent Transaction influenced by a special relationship.

18.

Arm’s Length Principle (ALP), hereinafter referred to as the Arm’s Length Principle, is a principle that applies in sound business practices as in an Uncontrolled Transaction.

19.

Transfer Pricing Documentation is documents maintained by a Taxpayer as the basis for the implementation of the Arm's Length Principle in Transfer Pricing conducted by the Taxpayer.

 

 

 

 

 

(1)

A resident Taxpayer may apply for APA to the Director General of Taxes for a Controlled Transaction based on:

 

a.

the Taxpayer’s initiative in the form of an application for Unilateral APA or Bilateral APA; or

 

b.

a written notice from the Director General of Taxes in connection with the application for Bilateral APA submitted by the non-resident taxpayer to the Competent Authority of the Tax Treaty Partner.

(2)

APA referred to in paragraph (1) may cover all or part of the Controlled Transaction during the APA Period and Roll-back in the event that the Taxpayer requests a Roll-back in the Application for APA.

(3)

Controlled Transaction referred to in paragraph (2) may be in the form of a Controlled Transaction between a Taxpayer and another resident Taxpayer and/or non-resident Taxpayer.

(4)

The roll-back referred to in paragraph (2) applies insofar as during the tax year:

 

a.

the facts and conditions of the Controlled Transaction do not differ materially from the facts and conditions of the Controlled Transaction agreed upon in the APA;

 

b.

the statute of limitation of the assessment has not elapsed;

 

c.

the Notice of Corporate Income Tax Assessment has not been issued; and

 

d.

a criminal investigation is not being conducted or is not currently undergoing a sentence in the field of taxation.

(5)

APA referred to in paragraph (2) is in the form of the agreement of:

 

a.

the criteria in Transfer Pricing; and

 

b.

Advance Pricing

 

for the APA Period and Roll-back in the event that the Taxpayer requests a Roll-back in the Application for APA.

(6)

Criteria referred to in paragraph (5) subparagraph a at least contain:

 

a.

the identity of Affiliated Parties covered by the APA;

 

b.

Controlled Transactions covered by the APA;

 

c.

the Transfer Pricing method used;

 

d.

ways to implement the agreed Transfer Pricing method; and

 

e.

critical assumptions affecting Transfer Pricing.

(7)

Critical assumptions referred to in paragraph (6) subparagraph e at least contain:

 

a.

written and unwritten contractual provisions in connection with the Controlled Transactions;

 

b.

functions performed by each transacting party, assets used and risks assumed to occur and borne by the parties;

 

c.

characteristics of the transactions and characteristics of the parties carrying out the Controlled Transactions; and

 

d.

economic conditions affecting Transfer Pricing.

(8)

The advance pricing referred to in paragraph (5) subparagraph b shall be conducted by applying the Arm’s Length Principle according to the conditions that have occurred and are expected to occur during the APA Period.

 

 

 

 

 

(1)

Based on the application referred to in Article 2 paragraph (1), the Director General of Taxes is authorised to make an agreement with the Taxpayer and cooperate with the Competent Authority of the Tax Treaty Partner to determine the price of the transaction between the Taxpayer and related parties, which applies during a certain period.

(2)

The Director General of Taxes is authorised to supervise the agreement referred to in paragraph (1) and renegotiate after the said certain period ends.

(3)

Special relationship referred to in paragraph (1) is a special relationship regulated in the Law concerning Income Tax and the Law concerning Value Added Tax.

 

 

 

 

 

(1)

Special relationship referred to in Article 3 paragraph (3) is a state of dependency or attachment of one party to another party caused by:

 

a.

ownership or capital participation;

 

b.

control; or

 

c.

a relationship by blood or marriage.

(2)

The state of dependency or attachment between one party and another party referred to in paragraph (1) is the condition where one or more parties:

 

a.

control(s) the other party; or

 

b.

is/are not independent,

 

in conducting business or activities.

(3)

 

a.

 

b.

 

c.

(4)

Special relationship due to the control referred to in paragraph (1) subparagraph b shall be deemed to exist in the event that:

 

a.

one party controls the other party or one party is controlled by the other party, directly and/or indirectly;

 

b.

two or more parties are under the direct control of the same party, directly and/or indirectly;

 

c.

there are the same persons who are directly and/or indirectly involved or participating in managerial or operational decision-making for two or more parties;

 

d.

parties that are commercially or financially known or claim to be in the same business group; or

 

e.

one party claims to have a special relationship with the other party.

(5)

Special relationship due to a relationship by blood or marriage referred to in paragraph (1) subparagraph c shall be deemed to exist if there is a family relationship either by blood or through marriage in a vertical lineage of one degree and/or in a horizontal lineage of one degree.

 

 

 

 

 

(1)

Resident taxpayer referred to in Article 2 paragraph (1) may apply for APA insofar as:

 

a.

the taxpayer has fulfilled the obligation to file the Annual Corporate Income Tax Return pursuant to statutory provisions in the field of taxation for 3 (three) tax years prior to the tax year in which the application for APA is submitted;

 

b.

the taxpayer has been obliged and has fulfilled the obligation to maintain and retain Transfer Pricing Documentation in the form of a master file and local file pursuant to statutory provisions in the field of taxation for 3 (three) tax years prior to the tax year in which the application for APA is submitted;

 

c.

is not under a criminal investigation or is not currently undergoing sentence in the field of taxation;

 

d.

the Controlled Transaction and Affiliated Parties that are proposed to be included in the application for APA referred to in Article 2 paragraph (2) constitute Controlled Transactions with Affiliated Parties that have been filed by the Taxpayer in the Annual Corporate Income Tax Return referred to in subparagraph a; and

 

e.

the proposed Transfer Pricing in the application for APA is prepared based on the Arm’s Length Principle and does not result in the Taxpayer's operating profit being lower than the operating profit filed in the Annual Corporate Income Tax Return referred to in subparagraph a.

(2)

A resident Taxpayer applying for APA referred to in paragraph (1) must apply to the Director General of Taxes through the Tax Office where the Taxpayer is registered.

(3)

application for APA referred to in paragraph (2) must fulfill the following requirements:

 

a.

submitted in writing in the Indonesian language by filling in the application for APA form correctly, completely and clearly as outlined in Appendix A which constitutes an integral part of this Ministerial Regulation;

 

b.

signed by the management whose name is listed in:

 

 

1.

the deed of establishment; or

 

 

2.

the deed of amendments, in the event of a change in management;

 

c.

submitted in a period of 12 (twelve) months up to 6 (six) months prior to the commencement of the APA Period; and

 

d.

attached with:

 

 

1.

a statement that the Taxpayer is willing to complete all the documents required in the APA process; and

 

 

2.

a statement that the Taxpayer is willing to implement the APA agreement.

(4)

application for APA referred to in paragraph (3) may be submitted:

 

a.

in person; or

 

b.

through certain channels stipulated by the Director General of Taxes.

(5)

The Director General of Taxes shall issue a receipt for the application for APA referred to in paragraph (4).

(6)

The date stated in the receipt referred to in paragraph (5) is the date of receipt of the application for APA.

 

 

 

 

 

(1)

For the application for APA referred to in Article 5 paragraph (2), the Director General of Taxes shall verify the:

 

a.

fulfilment of the requirements for the application for APA based on the provisions referred to in Article 5 paragraph (3); and

 

b.

fulfilment of the provisions on Taxpayers that may apply for APA referred to in Article 5 paragraph (1).

(2)

The Director General of Taxes shall follow up on the verification results referred to in paragraph (1) by issuing a written notice of whether or not an application for APA may be followed up to the:

 

a.

Taxpayer; and

 

b.

Competent Authority of the Tax Treaty Partner, in the case of an application for a Bilateral APA,

(3)

In the event that the period referred to in paragraph (2) has elapsed and the Director General of Taxes has not issued a written notice, the application for APA submitted by the Taxpayer is deemed eligible to be followed up.

(4)

In the event that the notification of an application for a Bilateral APA to the Competent Authority of the Tax Treaty Partner does not receive a written response within 8 (eight) months since the date of the written notice referred to in paragraph (2), the Director General of Taxes shall issue a written notice of the APA process termination to the:

 

a.

Taxpayer applying for APA; and

 

b.

Competent Authority of the Tax Treaty Partner.

(5)

For the application for APA that may be followed up referred to in paragraph (2) or deemed eligible to be followed up referred to in paragraph (3), the Taxpayer must submit a complete application for APA in person to the Director General of Taxes through the Director of International Taxation in the form of a hardcopy and a softcopy no later than 2 (two) months after:

 

a.

the date of the notification that the application for APA may be followed up as referred to in paragraph (2); or

 

b.

the end of 1 (one) month period as referred to in paragraph (3).

(6)

The complete application for APA referred to in paragraph (5) shall be at least in the form of:

 

a.

financial statements that have been audited by a public accountant for the last 3 (three) tax years prior to the tax year in which the application for APA is submitted;

 

b.

Transfer Pricing Documentation for the last 3 (three) tax years prior to the tax year in which the application for APA is submitted; and

 

c.

documents containing a detailed explanation of the implementation of the Arm’s Length Principle for each Controlled Transaction that is proposed to be covered in the APA in the Indonesian language.

(7)

Detailed explanation referred to in paragraph (6) subparagraph c shall at least contain the information outlined in Appendix B which constitutes an integral part of this Ministerial Regulation.

(8)

The Director General of Taxes shall directly issue a receipt for the submission of the complete application for APA referred to in paragraph (6).

(9)

The date stated in the receipt of the complete application for APA referred to in paragraph (8) is the date of receipt of the complete application for APA.

(10)

In the event that the complete application for APA referred to in paragraph (6) is not submitted by the Taxpayer within the period referred to in paragraph (5), the Director General of Taxes shall issue a written notice of the APA process termination to the:

 

a.

Taxpayer; and

 

b.

Competent Authority of the Tax Treaty Partner, in the case of an application for a Bilateral APA.

(11)

In the event that an application for APA cannot be followed up as referred to in paragraph (2) and the process of application for APA is terminated as referred to in paragraph (4) and paragraph (10), the Taxpayer may reapply for APA insofar as the provisions referred to in Article 5 paragraph (1) and paragraph (3) are fulfilled.

 

 

 

 

 

Section One
Civil Review on the Settlement of the Application for APA

 

(1)

For an application for APA that fulfills the complete requirements referred to in Article 6 paragraph (6), the Director General of Taxes shall conduct a civil review.

(2)

In the civil review referred to in paragraph (1), the Director General of Taxes is authorised to:

 

a.

carry out discussions with the Taxpayer related to the Taxpayer’s application for APA;

 

b.

inspect the place of business of the Taxpayer and/or Affiliated Parties;

 

c.

interview the management and/or employees of the Taxpayer;

 

d.

request additional data and/or information in the form of evidence, either in the form of documents or details, from the Taxpayer; and/or

 

e.

request data and/or information in the form of evidence, either in the form of documents or details, from Affiliated Parties or other relevant parties.

(3)

If necessary for the civil review referred to in paragraph (1), the Director General of Taxes may conduct an audit for other purposes pursuant to statutory provisions in the field of taxation.

(4)

The audit for other purposes referred to in paragraph (3) shall be conducted in the event that the Taxpayer:

 

a.

has never been audited in connection with Transfer Pricing on Controlled Transactions that are proposed to be covered in the APA as referred to in Article 2 paragraph (2) up to 3 (three) tax years prior to the tax year in which the application for APA is submitted; and/or

 

b.

requests a Roll-back in the Application for APA.

(5)

The civil review referred to in paragraph (1) shall be conducted by implementing the Arm’s Length Principle.

 

 

 

 

 

(1)

Arm’s Length Principle referred to in Article 7 paragraph (5) is implemented to determine the arm’s length Transfer Price.

(2)

Arm’s Length Principle referred to in paragraph (1) shall be implemented by comparing the conditions and price indicators of Transactions Influenced by a Special Relationship and conditions and price indicators of comparable Uncontrolled Transactions.

(3)

Price indicators referred to in paragraph (2) may be in the form of transaction prices, gross profit or net operating profit based on an absolute value or a certain ratio value.

(4)

A Transfer Price is deemed to fulfill the Arm’s Length Principle in the event that the indicator value of the Transfer Price is equal to the price indicator value of the comparable Uncontrolled Transaction.

(5)

The price indicator value of the Uncontrolled Transaction referred to in paragraph (4) may be in the form of:

 

a.

arm’s length point; or

 

b.

arm’s length range.

(6)

Arm’s length point referred to in paragraph (5) subparagraph a is a price indicator point formed by one or more comparables having the same price indicator values.

(7)

Arm’s length range referred to in paragraph (5) subparagraph b is a range of price indicators formed by two or more comparables having different price indicator values, in the form of:

 

a.

the minimum value up to the maximum value (full range), in the event that it is formed from two comparables; or

 

b.

the values of quartile one to quartile three (interquartile range), in the event that it is formed from three or more comparables.

(8)

In the event that the Transfer Price does not fulfill the Arm’s Length Principle referred to in paragraph (4), the Transfer Price shall be determined as in the pricing in an Uncontrolled Transaction using:

 

a.

arm’s length point;

 

b.

the most appropriate point in the arm’s length range according to the comparability; or

 

c.

the median in the arm’s length range, in the event that the most appropriate point referred to subparagraph b cannot be determined.

 

 

 

 

 

(1)

The implementation of the Arm’s Length Principle referred to in Article 8 paragraph (2) must be conducted:

 

a.

based on the actual situation;

 

b.

at the time of the Transfer Pricing and/or when an Independent Transaction Influenced by a Special Relationship occurs; and

 

c.

according to the stages of the Arm’s Length Principle implementation.

(2)

The stages of the Arm’s Length Principle implementation referred to in paragraph (1) subparagraph c include:

 

a.

identifying Transactions Influenced by a Special Relationship and Affiliated Parties;

 

b.

conducting an industry analysis in connection with the Taxpayer’s business, including identifying factors affecting business performance in the industry;

 

c.

identifying commercial and/or financial relationships between the Taxpayer and Affiliated Parties by analyzing the conditions of the transaction;

 

d.

conducting a comparative analysis;

 

e.

determining the Transfer Pricing method; and

 

f.

applying the Transfer Pricing method and determining the arm’s length price for the Transactions Influenced by a Special Relationship.

 

 

 

 

 

(1)

Conditions of the transactions referred to in Article 8 paragraph (2) constitute relevant economic characteristics to determine the arm’s length Transfer Price, such as:

 

a.

contractual provisions, either written or unwritten;

 

b.

functions performed, assets used and risks assumed by each transacting party;

 

c.

characteristics of the transacted products (goods or services);

 

d.

economic situation; and

 

e.

business strategies undertaken by the transacting parties.

(2)

Contractual provisions referred to in paragraph (1) subparagraph a are provisions that are implemented and/or applicable to the transacting parties pursuant to the actual situation, either written or unwritten.

(3)

Functions referred to in paragraph (1) subparagraph b are activities and/or responsibilities of the transacting parties in conducting business.

(4)

Assets referred to in paragraph (1) subparagraph b are tangible assets, intangible assets, financial assets and/or non- financial assets that affect the value creation, including access and level of market share in Indonesia.

(5)

Risks referred to in paragraph (1) subparagraph b are the impact of uncertainty in achieving business objectives assumed by the transacting parties.

(6)

Characteristics of the products referred to in paragraph (1) subparagraph c are the specific characteristics of the goods or services that significantly affect the pricing in the open market.

(7)

Economic situation referred to in paragraph (1) subparagraph d are economic characteristics of the place of business and the market of the transacting parties.

(8)

Business strategies referred to in paragraph (1) subparagraph e are strategies conducted by a company in conducting business in the open market.

 

 

 

 

 

(1)

The implementation of the Arm’s Length Principle referred to in Article 9 must be conducted separately for each type of Independent Transaction Influenced by a Special Relationship.

(2)

In the event that there are two or more types of Transactions Influenced by a Special Relationship that are interrelated and affect one another in the Transfer Pricing, thereby, the separate implementation of the Arm’s Length Principle referred to in paragraph (1) cannot be conducted reliably and accurately, the Arm’s Length Principle may be implemented by combining two or more types of the Transactions Influenced by a Special Relationship.

 

 

 

 

 

(1)

An Uncontrolled Transaction is comparable to an Independent Transaction Influenced by a Special Relationship being tested as referred to in Article 8 paragraph (2) insofar as:

 

a.

the conditions of the Uncontrolled Transaction are the same or similar to the conditions of the Independent Transaction Influenced by a Special Relationship being tested;

 

b.

the conditions of the Uncontrolled Transaction are different from the conditions of the Independent Transaction Influenced by a Special Relationship being tested, but the differences in the conditions do not affect the pricing; or

 

c.

the conditions of the Uncontrolled Transaction are different from the conditions of the Independent Transaction Influenced by a Special Relationship being tested and the differences in the conditions affect the pricing, but accurate adjustments may be adequately performed to the Uncontrolled Transactions to eliminate the material impact of the differences in the conditions on the pricing.

(2)

To determine the comparability of the Uncontrolled Transaction and the Independent Transaction Influenced by a Special Relationship as referred to in paragraph (1), a comparability analysis of the conditions of the transactions referred to in Article 10 paragraph (1) shall be conducted.

(3)

Comparability analysis referred to in paragraph (2) is conducted through the following stages:

 

a.

understanding the characteristics of the Independent Transaction Influenced by a Special Relationship being tested based on the results of identification of commercial and/or financial relationships between the Taxpayer and Affiliated Parties referred to in Article 9 paragraph (2) subparagraph c and determining the business characteristics of each transacting party;

 

b.

identifying the existence of Uncontrolled Transactions as reliable prospective comparables;

 

c.

determining the party whose transfer price indicator is being tested in the event that the method used is a profit-based method according to the implemented Transfer Pricing Method;

 

d.

identifying the differences in the conditions between the Independent Transaction Influenced by a Special Relationship being tested and prospective comparables;

 

e.

performing accurate adjustments appropriately to the prospective comparables to eliminate the material impact of the differences in conditions referred to in subparagraph d on the transaction price indicator; and

 

f.

determining the Uncontrolled Transaction constituting the selected comparable.

(4)

The parties being tested referred to in paragraph (3) subparagraph c are parties in the Independent Transaction Influenced by a Special Relationship that have simpler functions, assets, and risks.

(5)

Comparables referred to in paragraph (3) may be in the form of internal or external comparables.

(6)

Internal comparables referred to in paragraph (5) are transactions between an independent party and a Taxpayer or a Affiliated Party constituting the counterparty.

(7)

External comparables referred to in paragraph (5) are transactions between independent parties other than internal comparables.

(8)

In the event that internal comparables and external comparables with the same level of comparability and reliability are available, internal comparables are selected and used as comparables.

(9)

In the event that more than one external comparable with the same level of comparability and reliability are available, external comparables from the same country or jurisdiction as the party being tested according to the Transfer Pricing Method are selected and used as comparables.

 

 

 

 

 

(1)

Transfer Pricing Method referred to in Article 9 paragraph (2) subparagraph e used in the implementation of the Arm’s Length Principle may be in the form of:

 

a.

comparable uncontrolled price method;

 

b.

resale price method;

 

c.

cost-plus method; and/or

 

d.

other methods, such as:

 

 

1.

profit split method;

 

 

2.

transactional net margin method;

 

 

3.

comparable uncontrolled transaction method;

 

 

4.

tangible asset and intangible asset valuation; or

 

 

5.

business valuation.

(2)

Methods referred to in paragraph (1) are selected based on the accuracy and reliability of the methods, assessed in terms of:

 

a.

the suitability of the Transfer Pricing method with the characteristics of the Independent Transaction Influenced by a Special Relationship being tested and the business characteristics of the transacting parties;

 

b.

the advantages and disadvantages of each method that may be implemented;

 

c.

the availability of an Uncontrolled Transaction constituting a reliable comparable;

 

d.

the level of comparability between the Independent Transaction Influenced by a Special Relationship and Uncontrolled Transaction constituting a comparable; and

 

e.

the accuracy of the adjustments made in the event that there are differences in the conditions between the Independent Transaction Influenced by a Special Relationship and the Uncontrolled Transaction constituting a comparable.

(3)

Comparable uncontrolled price method referred to in paragraph (1) subparagraph a is conducted by comparing prices between the Independent Transaction Influenced by a Special Relationship being tested and the Uncontrolled Transaction and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship, as follows:

 

a.

transactions of commodity products; and

 

b.

transactions of goods or services with the same or similar characteristics of goods or services as the characteristics of goods or services in the Uncontrolled Transaction in comparable conditions.

(4)

Resale price method referred to in paragraph (1) subparagraph b shall be conducted by subtracting the arm’s length gross profit of the distributor or reseller from the resale price and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship and business characteristics of the transacting parties, as follows:

 

a.

the Independent Transaction Influenced by a Special Relationship is conducted by involving distributors or resellers that resell goods or services to an independent party or Affiliated Parties at prices that fulfill the Arm’s Length Principle; and

 

b.

distributors or resellers referred to in subparagraph a do not assume significant business risks, do not have unique and valuable contributions to the Independent Transaction Influenced by a Special Relationship or do not provide significant added value to the transacted goods or services.

(5)

Cost-plus method referred to in paragraph (1) subparagraph c is conducted by adding the arm’s length gross profit of the manufacturer or service provider to the cost of goods or services sold and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship and business characteristics of the transacting parties, as follows:

 

a.

the Independent Transaction Influenced by a Special Relationship is conducted by involving manufacturers or service providers that purchase raw materials or other production factors from an independent party or Affiliated Parties at prices that fulfill the Arm’s Length Principle; and

 

b.

manufacturers or service providers referred to in subparagraph a do not assume significant business risks and do not have unique and valuable contributions to the Independent Transaction Influenced by a Special Relationship.

(6)

Profit split method referred to in paragraph (1) subparagraph d number 1 is conducted by dividing the relevant combined profit of the transaction based on the functions, assets, risks and/or contributions of the parties in the Independent Transaction Influenced by a Special Relationship and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship and business characteristics of the transacting parties, as follows:

 

a.

the transacting parties have unique and valuable contributions to the Independent Transaction Influenced by a Special Relationship;

 

b.

the transacting parties’ businesses are highly integrated, thereby, the contributions of each transacting party cannot be analyzed separately; or

 

c.

the transacting parties share the assumption of economically significant risks or separately assume closely related risks.

(7)

Transactional net margin method referred to in paragraph (1) subparagraph d number 2 is conducted by comparing the level of net operating profit of the party being tested with the level of net operating profit of the comparables that may be selected insofar as there is no comparable at reliable and comparable levels of price and gross profit and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship and business characteristics of the transacting parties, as follows:

 

a.

one of the parties or the parties conducting the Independent Transaction Influenced by a Special Relationship do not have any unique and valuable contribution to the Independent Transaction Influenced by a Special Relationship;

 

b.

the transacting parties’ businesses are non-highly integrated; and

 

c.

the transacting parties do not share the assumptions of economically significant risks or do not separately assume closely related risks.

(8)

Comparable uncontrolled transaction method referred to in paragraph (1) subparagraph d number 3 is conducted by comparing the price/profit of a transaction on a certain basis between the Independent Transaction Influenced by a Special Relationship and Uncontrolled Transaction and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship that is commercially valued on a certain basis, among others, interest rates, discounts, fees, commissions and royalty percentages on sales or operating profits.

(9)

Tangible asset and intangible asset valuation referred to in paragraph (1) subparagraph d number 4 is conducted pursuant to tax provisions on the applicable valuation standards and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship, among others, as follows:

 

a.

transfer transactions of tangible assets and/or intangible assets;

 

b.

lease transactions of tangible assets;

 

c.

transactions relating to the use or right to use intangible assets;

 

d.

transfer transactions of financial assets;

 

e.

transfer transactions of rights in connection with the exploitation of mining areas and/or other similar rights; and

 

f.

transfer transactions of rights in connection with the cultivation of plantation, forestry and/or other similar rights.

(10)

Business valuation referred to in paragraph (1) subparagraph d number 5 is conducted pursuant to tax provisions on applicable valuation standards, and is appropriate for the characteristics of the Independent Transaction Influenced by a Special Relationship, among others, as follows:

 

a.

transactions in connection with business restructuring, including the transfer of functions, assets and/or risks between Affiliated Parties;

 

b.

transfer transactions of assets other than cash to the company, partnership and other entities as substitutes for shares or capital participation (inbreng); and

 

c.

transfer transactions of assets other than cash to the shareholders, partners or members of the company, partnership or other entities.

(11)

In the event that the method referred to in paragraph (1) subparagraph a and other methods may be used and have equivalent reliability, the method referred to in paragraph (1) subparagraph a takes precedence over the other methods.

(12)

In the event that the methods referred to in paragraph (1) subparagraph b, subparagraph c, subparagraph d number 1 and subparagraph d number 2 may be used and have equivalent reliability, the methods referred to in paragraph (1) subparagraph b or subparagraph c take precedence over the methods referred to in paragraph (1) subparagraph d number 1 and subparagraph d number 2.

 

 

 

 

 

(1)

The implementation of the Arm’s Length Principle to the Independent Transaction Influenced by a Special Relationship must be conducted with preliminary stages and stages referred to in Article 9 paragraph (2).

(2)

Transactions Influenced by a Special Relationship referred to in paragraph (1) include:

 

a.

service transactions;

 

b.

transactions in connection with the use or right to use intangible assets;

 

c.

transactions in connection with loan costs;

 

d.

transfer transactions of assets;

 

e.

business restructuring; and

 

f.

cost contribution agreement.

(3)

Preliminary stages for service transactions referred to in paragraph (2) subparagraph a include evidencing that the services:

 

a.

have actually been supplied by the service provider and acquired by the service recipient;

 

b.

are required by the service recipient;

 

c.

provide economic benefits to the service recipient;

 

d.

do not constitute shareholder activities;

 

e.

do not constitute activities that provide benefits to a party solely because the party is part of a business group (passive association);

 

f.

are not the duplication of activities that have been conducted by the Taxpayers themselves;

 

g.

do not constitute services that provide incidental benefits; and

 

h.

in the case of on-call services, do not constitute services that may be acquired immediately from an independent party without a prior on-call contract.

(4)

Preliminary stages for transactions in connection with the use or right to use intangible assets referred to in paragraph (2) subparagraph b include evidencing that:

 

a.

the economical and legal existence of intangible assets;

 

b.

types of intangible assets;

 

c.

value of intangible assets;

 

d.

parties that legally own intangible assets;

 

e.

parties that economically own intangible assets;

 

f.

the use or right to use intangible assets;

 

g.

parties that contribute to and carry out development, enhancement, maintenance, protection and exploitation over intangible assets; and

 

h.

economic benefits acquired by the parties using the intangible assets.

(5)

Preliminary stages for the transaction related to loan costs referred to in paragraph (2) subparagraph c include evidencing that the loan:

 

a.

is according to the substance and actual situation;

 

b.

is required by the borrower;

 

c.

is used to derive, maintain and collect income pursuant to statutory provisions in the field of income tax;

 

d.

fulfills the characteristics of a loan, including:

 

 

1.

the creditor recognizes loans economically and legally;

 

 

2.

there is loan maturity date;

 

 

3.

there is an obligation to repay the loan principal;

 

 

4.

the existence of payments according to the set schedule, either for the loan principal and the return;

 

 

5.

when the loan is acquired, the borrower has the ability to:

 

 

 

a)

acquire a loan from an independent creditor; and

 

 

 

b)

repay the loan principal and loan return as an independent debtor;

 

 

6.

based on a loan agreement prepared pursuant to applicable statutory provisions;

 

 

7.

the existence of legal consequences in the event that the borrower fails to repay the loan principal and/or the return; and

 

 

8.

there is a right to collect for the lender as an independent creditor; and

 

e.

provides economic benefits to the lender.

(6)

Preliminary stages for transfer transactions of assets referred to in paragraph (2) subparagraph d include evidencing that:

 

a.

motives, objectives and economic rationale of the transfer transactions of assets;

 

b.

the transfer of assets is according to the substance and actual condition;

 

c.

the expected benefits from the transfer of assets; and

 

d.

the transfer of assets constitutes the best option among other available options.

(7)

Preliminary stages for business restructuring referred to in paragraph (2) subparagraph e include evidencing that:

 

a.

motives, objectives and economic rationale of business restructuring;

 

b.

business restructuring is according to the substance and actual condition;

 

c.

the expected benefits from business restructuring; and

 

d.

business restructuring constitutes the best option among other available options.

(8)

Preliminary stages for cost contribution agreement referred to in paragraph (2) subparagraph f include evidencing that the cost contribution agreement:

 

a.

is prepared according to the agreement between independent parties;

 

b.

is required by the parties making the agreement; and

 

c.

provides economic benefits to the party making the agreement.

(9)

In the event that the Taxpayer is unable to evidence the Independent Transaction Influenced by a Special Relationship based on the preliminary stages referred to in paragraph (1), the said Independent Transaction Influenced by a Special Relationship does not fulfill the Arm’s Length Principle referred to in Article 8.

 

 

 

 

 

 

(1)

The Director General of Taxes carries out APA discussions with the:

 

a.

Taxpayer, in the case of a Unilateral APA; or

 

b.

Competent Authority of the Tax Treaty Partner through MAP, in the case of a Bilateral APA.

(2)

Unilateral APA discussions referred to in paragraph (1) subparagraph a must:

 

a.

commence no later than 6 (six) months since the Taxpayer submits a complete application for APA within the period referred to in Article 6 paragraph (5); and

 

b.

be settled within a period of 12 (twelve) months since the commencement of APA discussions referred to in subparagraph a.

(3)

Bilateral APA discussions referred to in paragraph (1) subparagraph b shall be conducted pursuant to statutory provisions on MAP.

(4)

Director General of Taxes establishes the APA discussion delegation referred to in paragraph (1).

(5)

Results of APA discussions referred to in paragraph (1) may contain agreements or disagreements over the criteria in Transfer Pricing and Advance Pricing referred to in Article 2 paragraph (5).

(6)

The Director General of Taxes may disagree on APA, among others, in terms of:

 

a.

the Controlled Transaction is not based on economic motives;

 

b.

the economic substance of the Controlled Transaction differs from its formal form;

 

c.

one of the objectives of the Controlled Transaction is to minimize tax burden;

 

d.

the information and/or evidence or details submitted by the Taxpayer are incorrect or not according to the actual condition;

 

e.

the information and/or evidence or details in connection with the exercise of authority referred to in Article 7 paragraph (2) subparagraph d cannot be obtained by the Director General of Taxes within 14 business days since the date of the written application; and/or

 

f.

the tax year in the APA Period or the Price in the Roll-back in which a Notice of Corporate Income Tax Assessment has been issued.

(7)

Results of APA discussions are deemed to contain disagreements as referred to in paragraph (5) in the event that:

 

a.

APA discussions do not result in an agreement until the end of the APA discussion period referred to in paragraph (2) and paragraph (3); or

 

b.

the Director General of Taxes receives written notice from the Competent Authority of the Tax Treaty Partner that APA discussions cannot be conducted.

(8)

In the event that APA discussions result in disagreement as referred to in paragraph (5), the Director General of Taxes shall terminate the APA process and issue a written notice to the Taxpayer.

(9)

Taxpayers may apply for Unilateral APA discussions to the Director General of Taxes through the Director of International Taxation in the event that:

 

a.

Bilateral APA discussions result in disagreement as referred to in paragraph (5); or

 

b.

Bilateral APA process is terminated because the Competent Authority of the Tax Treaty Partner does not submit a written response as referred to in Article 6 paragraph (4),

 

no later than 10 (ten) business days since the date of the written notice referred to in paragraph (8) or in Article 6 paragraph (4).

(10)

For an application for Unilateral APA discussions submitted within the period referred to in paragraph (9), the Director General of Taxes shall carry out discussions with the Taxpayer for a maximum of:

 

a.

6 (six) months since the receipt of the application in the event that the application is submitted because the Bilateral APA results in disagreement as referred to in paragraph (9) subparagraph a; or

 

b.

12 (twelve) months from the receipt of the application in the event that the application is submitted because the Bilateral APA process is terminated as referred to in paragraph (9) subparagraph b.

(11)

In the event that until the deadline referred to in paragraph (10), an agreement has not been reached, results of Unilateral APA discussions shall be deemed to constitute disagreement as referred to in paragraph (5).

(12)

Results of APA discussions referred to in paragraph (5) are outlined in:

 

a.

Decree on the Enactment of APA, in the event that the Unilateral APA discussions result in agreement; or

 

b.

Mutual Agreement is pursuant to statutory tax provisions on mutual agreement procedure, in the case of a Bilateral APA.

(13)

Decree on the Enactment of APA referred to in paragraph (12) shall be prepared using the sample format outlined in Appendix C which constitutes an integral part of this Ministerial Regulation.

(14)

For results of APA discussions referred to in paragraph (12), the Director General of Taxes shall follow up on:

 

a.

Decree on the Enactment of APA by issuing a decree on APA enactment within a maximum period of 1 (one) month since the Decree on the Enactment of APA is signed; or

 

b.

Mutual Agreement by issuing a decree on APA enactment pursuant to statutory tax provisions on mutual agreement procedure.

(15)

The decree on APA enactment referred to in paragraph (14) shall be submitted to the:

 

a.

Taxpayer applying for APA; and

 

b.

work units within the Directorate General of Taxes authorised to follow up.

 

 

 

 

 

(1)

For application for APAs referred to in Article 2 paragraph (1), a Taxpayer may apply for the revocation of the application for APAs.

(2)

Revocation of application for APAs referred to in paragraph (1) must fulfill the following requirements:

 

a.

submitted in writing in the Indonesian language by stating the reasons for revocation;

 

b.

submitted before an agreement is reached;

 

c.

signed by the management whose names are stated in the deed of establishment or deed of amendments, in the event of a change in management; and

 

d.

the revocation of the application for APA referred to in paragraph (1) shall be prepared using the format outlined in Appendix D which constitutes an integral part of this Ministerial Regulation.

(3)

Revocation of application for APA referred to in paragraph (1) shall be submitted in person by the Taxpayer to the Director General of Taxes through the Director of International Taxation.

(4)

For the revocation of the submitted application for APA, the Director General of Taxes verifies the fulfilment of the requirements for the revocation of the submitted application for APA as referred to in paragraph (2) and issues a written notice concerning the APA process termination to the:

 

a.

Taxpayer; and

 

b.

Competent Authority of the Tax Treaty Partner, in the case of a Bilateral APA,

 

within 10 (ten) business days since the revocation of the application for APA is received by the Director General of Taxes.

(5)

In the event that the revocation of application for APA referred to in paragraph (1) is submitted after the APA discussions commence, the Taxpayer may not resubmit the application for APA for the tax year covered in the revoked application for APA.

 

 

 

 

 

CHAPTER V
PROCEDURES FOR APA IMPLEMENTATION
 

(1)

The Taxpayer must implement the agreement in APA contained in the decree on APA enactment referred to in Article 15 paragraph (14) pursuant to statutory provisions in the field of taxation.

(2)

The agreement in APA referred to in paragraph (1) must be reflected in the Transfer Pricing policy of the Taxpayer and the implementation must be outlined in the Transfer Pricing Documentation for the APA Period.

(3)

In the event that within the APA Period and/or Roll-back:

 

a.

Annual Corporate Income Tax Return has been filed;

 

b.

the Director General of Taxes has not conducted an audit; and

 

c.

there is an underpayment of income tax payable calculated based on the agreement in APA,

 

the Taxpayer must rectify the Annual Corporate Income Tax Return pursuant to the agreement in APA no later than 1 (one) month after the issuance of the decree on APA enactment.

(4)

In the event that the APA Period and/or Roll-back are being audited, the Director General of Taxes shall issue a Notice of Corporate Income Tax Assessment by taking into account the agreement in APA.

(5)

In the event that in the tax year of the APA Period, a Notice of Tax Assessment has been issued, the Director General of Taxes shall rectify the Notice of Tax Assessment ex officio pursuant to the provisions referred to under the Law concerning General Provisions and Tax Procedures by taking into account the agreement in APA.

 

 

 

 

 

(1)

In supervising the agreement as referred to in Article 3 paragraph (2), the Director General of Taxes shall evaluate the agreement in APA contained in the decree on APA enactment referred to in Article 15 paragraph (14).

(2)

In the evaluation referred to in paragraph (1), the Director General of Taxes is authorised to:

 

a.

conduct discussions with the Taxpayer concerning the implementation of the agreement in APA;

 

b.

request the Taxpayer to provide the required information and/or evidence or details;

 

c.

inspect the place of business of the Taxpayer and/or the Taxpayer’s Affiliated Parties;

 

d.

interview the Taxpayer’s management and/or employees; and/or

 

e.

request information and/or evidence or details from Affiliated Parties or other relevant parties.

(3)

Based on the evaluation results referred to in paragraph (1), the Director General of Taxes is authorised to:

 

a.

perform a civil review on APA, insofar as there is a material change in the facts and conditions of the Controlled Transactions covered by APA with critical assumptions agreed upon in APA; or

 

b.

cancel the agreement in APA,

 

before the APA period ends.

 

 

 

 

 

(1)

APA civil review referred to in Article 18 paragraph (3) subparagraph a may also be conducted based on an application for APA civil review submitted by the Taxpayer.

(2)

Applications for APA civil review referred to in paragraph (1) must be submitted in person to the Director General of Taxes through the Director of International Taxation by filling in the APA civil review application form correctly, completely and clearly as referred to in Appendix E which constitutes an integral part in this Ministerial Regulation.

(3)

The Director General of Taxes shall directly issue a receipt of the application for APA civil review referred to in paragraph (2).

(4)

The date stated in the receipt referred to in paragraph (3) is the date of receipt of the application for APA civil review.

(5)

In the APA civil review, the Director General of Taxes shall implement the provisions referred to in Article 6 to Article 15.

(6)

Results of the discussions on APA civil review are outlined in the amendment to the Decree on the Enactment of APA or Mutual Agreement.

(7)

Upon the amendment to the Decree on the Enactment of APA or Mutual Agreement referred to in paragraph (6), the Director General of Taxes shall issue a decree on amendments to APA by including the tax year in the APA Period subject to the civil review.

 

 

 

 

 

Section Three
APA Cancellation
 

(1)

The Director General of Taxes may cancel the agreement in the APA contained in the decree on APA enactment referred to in Article 15 paragraph (14), if based on evaluation results, it is known that:

 

a.

the Taxpayer submits information and/or evidence or details that are incorrect or not according to the actual conditions; and/or

 

b.

the Taxpayer does not submit information and/or evidence or details which:

 

 

1.

are known or should be known by the Taxpayer; and

 

 

2.

may affect the agreements in APA,

 

 

to the Director General of Taxes without having to wait for a request from the Director General of Taxes.

(2)

Upon the agreements in the cancelled APA referred to in paragraph (1), the Director General of Taxes shall issue:

 

a.

a decree on the cancellation of the agreement in APA to the Taxpayer; and

 

b.

a notice of APA cancellation to Competent Authority of the Tax Treaty Partner, in the case of Bilateral APA.

(3)

In the event that the Director General of Taxes cancels APA as referred to in paragraph (1):

 

 

 

 

 

CHAPTER VII
PROCEDURES FOR APA RENEWAL
 

(1)

In renegotiating the agreement after a certain period ends as referred to in Article 3 paragraph (2), the Taxpayer may apply for APA renewal to the Director General of Taxes through the Tax Office where the Taxpayer is registered by filling in the APA renewal application form correctly, completely and clearly as outlined in the Appendix F which constitutes an integral part of this Ministerial Regulation.

(2)

The Director General of Taxes shall issue a receipt of the APA renewal application referred to in paragraph (1).

(3)

The date stated in the receipt referred to in paragraph (2) is the date of receipt of the APA renewal application.

(4)

Based on the APA renewal application referred to in paragraph (1), the Director General of Taxes may agree on 1 (one) time APA renewal for 1 (one) APA Period since the end of the APA Period agreed in the previous APA.

(5)

The application for APA renewal referred to in paragraph (1) must be submitted in person and submitted within a period of 12 (twelve) months up to 6 (six) months before the last tax year in the previous APA Period.

(6)

APA renewal referred to in paragraph (1) may be provided in event that:

 

a.

the Taxpayer implements all agreements in the previous APA;

 

b.

there is no material change in the facts and/or conditions of Controlled Transactions covered in the previous APA with critical assumptions agreed upon in the previous APA; and

 

c.

entities and Controlled Transactions that are proposed to be covered in the APA renewal are the same as the previous APA.

(7)

The application for APA renewal referred to in paragraph (3) is equivalent to an application for APA that has fulfilled the complete requirements referred to in Article 6 paragraph (6).

(8)

Upon the application for APA renewal referred to in paragraph (5), the Director General of Taxes shall carry out the civil review process until the discussions referred to in Article 7 to Article 15.

 

 

 

 

 

CHAPTER VIII
OTHER PROVISIONS
 

(1)

APA Agreement does not prevent the Director General of Taxation from carrying out an audit, preliminary audit or tax crime investigation pursuant to statutory provisions in the field of taxation.

(2)

In the event that a Taxpayer is under an audit, preliminary audit or tax crime investigation as referred to in paragraph (1), the Director General of Taxes cannot rectify the Transfer Pricing on transactions covered by the APA agreement, insofar as the Taxpayer implements the agreement in APA.

(3)

The requirements referred to in paragraph (2) do not apply in the event that the Taxpayer:

 

a.

files Annual Corporate Income Tax Return in which the Transfer Pricing is not according to the agreement in APA;

 

b.

does not file rectifications to the Annual Corporate Income Tax Return until the deadline referred to in Article 17 paragraph (3);

 

c.

files rectifications to the Annual Corporate Income Tax Return in which the Transfer Pricing is not according to the agreements in the APA; or

 

d.

does not file the Annual Corporate Income Tax Return for the tax year in the APA Period.

(4)

In the event that the APA process does not result in an agreement between the Director General of Taxes and the Taxpayer or the Competent Authority of the Tax Treaty Partner, the Taxpayer’s documents used during the APA process must be completely returned to the Taxpayer.

(5)

Documents referred to in paragraph (4) cannot be used by the Director General of Taxes as a basis for conducting an audit, preliminary audit or tax crime investigation.

(6)

In the event that the Competent Authority of Tax Treaty Partner requires information and/or evidence or details from the Taxpayer in APA discussions, the request for information shall be conducted pursuant to statutory provisions in the field of taxation stipulating MAP.

(7)

In the event that during the discussions, it is discovered that the Taxpayer is under an audit, preliminary audit or tax crime investigation, the Director General of Taxes shall terminate the APA process and issue a written notice concerning the APA process termination to the:

 

a.

Taxpayer; and

 

b.

Competent Authority of the Tax Treaty Partner, in the case of a application for Bilateral APA.

(8)

The difference between the value of the Independent Transaction Influenced by a Special Relationship that is not according to the Arm’s Length Principle and the value of the Independent Transaction Influenced by a Special Relationship that is according to the Arm’s Length Principle shall be considered as a dividend subject to Income Tax pursuant to statutory provisions in the field of taxation.

(9)

Further provisions on:

 

a.

procedures for advance pricing agreement referred to in Article 5 to Article 7 and Article 15 to Article 21;

 

b.

procedures for the implementation of the Arm’s Length Principle in the Independent Transaction Influenced by a Special Relationship referred to in Article 8 through Article 14 and paragraph (8); and

 

c.

the special relationship referred to in Article 4,

 

shall be regulated by a Director General of Taxes Regulation.

 

 

 

 

 

(1)

The Arm’s Length Principle referred to in Article 8 to Article 14 must also be implemented by the Taxpayer in the exercise of rights and fulfilment of obligations in the the field of taxation in connection with Transactions Influenced by a Special Relationship.

(2)

In the event that:

 

a.

the Taxpayer does not implement the Arm’s Length Principle as referred to in Article 8 paragraph (2);

 

b.

the implementation of the Arm’s Length Principle by the Taxpayer is not according to the provisions under Article 9 paragraph (1) and Article 14; or

 

c.

the Transfer Price determined by the Taxpayer does not fulfill the Arm’s Length Principle referred to in Article 8 paragraph (4),

 

the Director General of Taxes is authorised to determine the Transfer Price according to the Arm’s Length Principle.

 

 

 

 

 

(1)

The determination of the arm’s length price for the Independent Transaction Influenced by a Special Relationship referred to in Article 1 number 14 subparagraph b by the resident Taxpayer is conducted by implementing the Arm’s Length Principle referred to in Article 8.

(2)

In the event that the resident Taxpayer conducting the Independent Transaction Influenced by a Special Relationship in paragraph (1) fulfills the provisions as a permanent establishment as stipulated under statutory provisions on the determination of permanent establishment, the resident Taxpayer shall also be stipulated as a permanent establishment.

(3)

The permanent establishment referred to in paragraph (2) must submit all data and/or information in connection with transactions conducted by overseas Affiliated Parties in connection with the business or activities of the Permanent Establishment in Indonesia pursuant to statutory provisions in the field of taxation.

(4)

Data and/or information referred to in paragraph (3) shall be used to determine the transaction value of the permanent establishment referred to in paragraph (2).

(5)

In the event that the permanent establishment does not fulfill the provisions referred to in paragraph (3), the transaction value is determined by implementing the Arm’s Length Principle.

(6)

The fulfilment of tax obligations of the permanent establishment referred to in paragraph (2) shall be conducted pursuant to statutory provisions in the field of taxations.

(7)

The fulfilment of tax rights and obligations previously conducted by the resident Taxpayer shall be taken into account in the fulfilment of the tax rights and obligations of the permanent establishment referred to in paragraph (2).

 

 

 

 

 

When this Ministerial Regulation comes into force:

1.

upon applications for preliminary discussions that has been received by the Director General of Taxes since the enactment of the Minister of Finance Regulation No. 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement until the enactment of this Ministerial Regulation, the Director General Taxes shall issue a notice to the Taxpayer to submit application for APA pursuant to the provisions under this Ministerial Regulation;

2.

upon the application for APA that has been received by the Director General of Taxes prior to the enactment of this Ministerial Regulation and Decree on the Enactment of APA or Mutual Agreement has not been issued, further processes shall be conducted pursuant to the provisions under this Ministerial Regulation;

3.

the APA for which a decree on APA enactment has been issued since the enactment of the Minister of Finance Regulation No. 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement until the enactment of this Ministerial Regulation:

 

a.

shall be implemented based on the provisions referred to in Article 17 of this Ministerial Regulation; and

 

b.

an evaluation process shall be conducted pursuant to the provisions referred to in Article 18 of this Ministerial Regulation;

4.

for applications for APA renewal that have been received by the Director General of Taxes since the enactment of the Minister of Finance Regulation No. 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement until the enactment of this Ministerial Regulation, processes pursuant to the provisions referred to in Article 21 of this Ministerial Regulation shall be conducted.

 

 

 

 

 

CHAPTER X
CLOSING PROVISIONS
 

With the enactment of this Ministerial Regulation, Minister of Finance Regulation Number 7/PMK.03/2015 concerning Procedures for the Establishment and Implementation of Advance Pricing Agreement (State Gazette of the Republic of Indonesia of 2015 Number 39) is revoked and declared invalid.

 

 

 

 

 

This Ministerial Regulation shall come into force on the date of promulgation.

 

 

 

 

 

For public cognisance, this Ministerial Regulation shall be promulgated by placement in the Official Gazette of the Republic of Indonesia.

 

 

 

 

 

Enacted in Jakarta
on 18 March 2020
MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA,
signed
SRI MULYANI INDRAWATI

Promulgated in Jakarta
on 18 March 2020
DIRECTOR GENERAL OF LEGISLATION 

MINISTRY OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA,
signed
WIDODO EKATJAHJANA

OFFICIAL GAZETTE OF THE REPUBLIC OF INDONESIA OF 2020 NUMBER 262