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Transfer Pricing Document (TP Doc) Regulation: Mandatory for Companies Involved in Affiliate Transaction in Indonesia

It is very common for a foreign investor to provide a capital loan to its subsidiary company in Indonesia. Pursuant to the tax issues on such transactions, Action Plan 13 has been implemented as a regulation in Indonesia. It is part of the Base Erosion and Profit Shifting (BEPS) Action Plans. In order to make investment to Indonesia easier, the Ministry of Finance has enacted Minister of Finance (PMK) Regulation Number 213/PMK.03 / 2016 concerning Types of Documents and Additional Information That Must Be Stored By Taxpayer (“TP DOC Regulation”). The TP DOC Regulation is a law in Indonesia that stipulates that every transaction – whether local or international –must to provide documentation known as a TP Doc.

Definition of Transfer Pricing

Based on Article 1 (5) of the TP DOC Regulation, Transfer Pricing is the pricing in an Affiliate Transaction. Further, according to Article 1 (6) of the TP DOC Regulation, the Transfer Price Determination Document is a document organized by the Taxpayer as the basis for the application of the Principles of Fairness and Normality of Business in determining the Transfer Price carried out by the Taxpayer.

Who is subject to performing TP Doc Regulation?

The object in Transfer Pricing is an Affiliate Transaction. Based on Article 1 (3) of the TP DOC Regulation, an Affiliate Transaction is a transaction carried out by a Taxpayer with an Affiliated Party. Thus, the subjects of TP Doc are Taxpayers and Affiliated Parties.

Based on Article 1 (2) of TP DOC Regulation, an Affiliated Party is a party that has a Special Relationship with a Taxpayer. According to Article 18 paragraph (4) of Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax, a Special Relationship is considered to exist if:

  • Taxpayers have direct or indirect capital participation of at least 25% in other Taxpayers; the relationship between Taxpayers with participation of at least 25% in two or more Taxpayers; or the relationship between two or more Taxpayers referred to last;
  • The Taxpayer controls another Taxpayer or two or more Taxpayers are under the same control either directly or indirectly; or
  • There are family relationships both inbred and cemented in a straight lineage and/or to the side of one degree.

TP Doc Obligation

Taxpayers are required to keep three types of documentation: a Master File, a Local File (which must be available within four months after the end of the fiscal year), and a Country-by-Country Report (CbCR). They must all be submitted in Bahasa Indonesia. Taxpayers must also prepare a statement letter signed by the individual who prepared Transfer Pricing Documentation to declare when the Transfer Pricing Reports will be available. The statement letter does not have to be filed with tax returns, but it should be attached to the Master File and Local File for submission to the Tax Authorities if requested. In general, transactions that satisfy any of the following criteria must have a TP Doc:

  • Gross Revenue (revenue from main business activities before deducting sales discounts, etc.) in the preceding year exceeding IDR 50 billion
  • Tangible goods transactions in the preceding year exceeding IDR 20 billion
  • Related party transactions with an affiliated entity located in a jurisdiction with a tax rate lower than Indonesia with no threshold applicable
  • Taxpayers that qualify as a parent entity of a business group (a parent entity is defined as the entity directly or indirectly controlling the business group and is required to prepare consolidated financial statements under the Indonesian Financial Accounting Standards), with consolidated gross revenue of at least IDR 11 trillion.

Risk of Non-compliance

Failure to comply with Indonesian transfer pricing policies and procedures, as well as failing to provide the necessary documentation, may result in costly transfer pricing audits and significant additional tax liabilities or penalties.

How Schinder can Help

Schinder Law Firm is a leading corporate law firm in Indonesia, practicing Indonesian Company Law and Indonesian Investment Law. Our team of corporate lawyers in Indonesia and investment lawyers has forged a reputation for assisting various clients across the globe. As Indonesian business lawyers, we have extensive experience providing services in company registration, obtaining a mandatory business license and providing legal consultancy services. Following the TP DOC obligation, we have been entrusted by a dozen multinational companies to assist them with compliance and have been appointed as a permanent legal consultant to help them deal with daily legal matters. To learn more, contact us at info@schinderlawfirm.com for further consultation.

Author: Budhi Satya Makmur

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Data is a valuable currency in this new world. In the midst of digital transformation, the Indonesian government has taken the final decision to pass the Pelindungan Data Pribadi (PDP) Bill by September 2022. The PDP Law applies to all businesses established in Indonesia and puts the consumer in control. The task of complying with this regulation falls upon businesses.

The PDP Law affects a variety of business operations, including how your sales team prospect and how marketing initiatives are managed. Businesses have had to reassess their business procedures, applications, and forms. Additionally, all businesses that work with personal data should designate a Data Protection Officer (DPO) or data controller to oversee PDP compliance.

In line with this spirit, it gives us great pleasure to announce and share with all our esteemed clients and business associates that Schinder Law Firm is prepared to assist your company to understand the impacts of the Personal Data Protection Law (PDPL) and take the required measures to comply with the law. Our Privacy, Data Protection, and Cybersecurity practice group is a pioneer in providing data privacy law services in Indonesia. Personal data protection services include but are not limited to:

  • Assessing the existing systems, processes, and controls, etc.
  • Providing provide gap assessment on the existing systems, processes, and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDP Law
  • Developing policies, best practices, and procedures
  • Advising on the security of personal data and managing data breaches
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role, and responsibilities of a data protection officer
  • Advising on cross-border transfers of personal data
  • Carrying out data protection impact assessments and data protection audits
  • Recommending other necessary corrective actions in order to comply with the PDP Law
  • Training on the PDP Law tailored to clients’ businesses

We look forward to many more opportunities in the year ahead with your continued support and trust. For consultation, please send us a WhatsApp or Email.

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Naz Schinder
Managing Partner

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Keep Up with the New Law in Indonesia: Personal Data Protection

  • Assessing the existing systems, processes and controls, etc.
  • Providing provide gap assessment on the existing systems, processes and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDPL.
  • Developing policies, best practices and procedures.
  • Advising on security of personal data and managing data breaches.
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role and responsibilities of a data protection officer.
  • Advising on cross-border transfers of personal data.
  • Carrying out data protection impact assessments and data protection audits.
  • Recommending other necessary corrective actions in order to comply with the PDPL.
  • Training on the PDPL tailored to clients’ businesses.
Privacy, Data Protection and Cyber Security
We help our clients to understand the impact of the Personal Data Protection Law (PDPL) on their companies and take the required measures to comply with the law.
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