Transfer Pricing Documentation Based on PMK 213/PMK.03/2016

Indonesia has been issued regulation about Transfer Pricing Documentation through Regulation Of The Minister Of Finance Of Republic Indonesia Number 213/PMK.03/2016 Concerning Type Of Documents And/Or Additional Information Which Must Be Advised By Taxpayer That Doing Transaction With Related Party And The Procedures Of Management. This regulation is needed to avoid BEPS (Base Erosion and Profit Shifting) that usually play by multinational company that associated in group company which operate around the world. The regulation is applying for fiscal year 2016 and required taxpayer to make 3 files that consist of:

  1. Master File
  2. Local File
  3. CbCR (Country by Country Report)

Master file must be contain about Business Group Structure that consist of Geographic Location of Business, Share Information and Ownership Scheme. The master file could make once for the attached of annual corporate income tax return for some fiscal year. Then, local file must be contain about Management Structure, Business Strategy, Operational Aspect, and Background of Business for identification and business operation explanation. This local file explain too about affiliated and non affiliated transaction information, and arm’s length principle information of company transaction with 5 these method:

  1. The comparable uncontrolled price method (CUP)
  2. The resale price method (RPM)
  3. The cost plus method (CPM)
  4. The profit split method (PSM)
  5. The transactional net margin method (TNMM)

Transfer Pricing Documentation (or called TP Doc) must be contain the explanation of using one of some arm’s length principle method. Here is the simple ilustration of using fair price for affiliated or non affiliated transaction.

There’s not all of company must be provide Transfer Pricing documentation. Here’s the criteria of company that doesn’t need to make transfer pricing documentation by observe this points:

  1. Doesn’t have affiliated transaction in current year
  2. Gross revenue < 50 billion in previous year
  3. Affiliated transaction of tangible good <20 billion in previous year
  4. Affiliated transaction of intangible good, services and interest < 5 billion
  5. In the current year, no have transaction with the other country that have tax tariff under tax tariff in the article 17 of Indonesia Income Tax Law