Worldwide transfer pricing reference guide 2014

Indonesia (continued)
Priorities/pricing methods (continued)
• The advantages and disadvantages of each method
• The suitability of the method based on the functional analysis
• The availability of reliable information to apply the method
• The level of comparability between the tested transaction and potential comparable data, including the reliability of potential adjustments
Transfer pricing penalties
There is a penalty of 2% per month — up to 48% — on any tax underpayment arising from adjustments of income and costs corresponding
to related party transactions as a result of the tax audit process.
Inappropriate disclosure of information relating to related party transactions by a taxpayer in corporate income tax return may be
construed as an act of fraud that could lead to an administrative penalty of up to 400% of tax underpayment.
Penalty relief
There are no provisions for penalty relief.
Documentation requirements
Under PER–43, transfer pricing documentation is mandatory. In 2011, PER–32 limited the documentation requirement to transactions
with a total value of IDR10 billion or more for each counter party in a fiscal year.
Taxpayers are required to indicate whether transfer pricing documentation has been prepared when they file the transfer pricing
schedule to the corporate income tax return (Form 3A/3B) as well as to disclose the transfer pricing method that has been used to price
their related party transactions during the year.
Documentation requirements are largely prescriptive and should also address key points that will be raised by the DGT on audit based
on the transfer pricing audit regulations that have been introduced. Particularly, the most recent transfer pricing audit regulations were
released at the end of 2013.
Documentation deadlines
As noted above, taxpayers are required to indicate whether transfer pricing documentation has been prepared when they file
the transfer pricing schedule to the corporate income tax return in Form 3A/3B. Following a formal request for transfer pricing
documentation from the DGT, taxpayers are required to submit their documentation within 30 days.
Statute of limitations on transfer pricing assessments
There is no separate statute of limitation for transfer pricing. Under Indonesian tax law, the DGT is permitted to conduct a tax audit,
that includes assessments of the arm’s length nature of related party transactions, within five years of the relevant fiscal year.
Return disclosures/related party disclosures
The disclosure of domestic and international related party transactions with the corporate income tax return is required in Form 3A/3B.
The information required includes the counterparty, the type of transaction, the value of the transaction, the transfer pricing method
applied and the reason for the application of the method. Additionally, taxpayers are also required to disclose whether they have
prepared transfer pricing documentation.
Transfer pricing–specific returns
There are no transfer pricing-specific returns required until a transfer pricing audit commences, at which point the taxpayer is required
to complete forms specific to the audit process.
Worldwide transfer pricing reference guide
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