Minister of Finance Regulation No. 213/PMK.03/2016
Global Tax Update:January 2017/Indonesia
The Minister of Finance of the Republic of Indonesia (“MoF”) has issued Regulation No. 213/PMK.03/2016 (“PMK-213”) implementing the new documentation requirement for transfer pricing matters. This includes the Master file/Local File requirement and CbCR for Indonesian Taxpayers dealing with related parties. As anticipated, Indonesia’s Master file/Local File and CbCR rules are consistent with the Organisation for Economic Co-operation and Development (“OECD”) recommendations outlined in the final report on Transfer Pricing Documentation and Country-by-Country Reporting – Action 13. (Global Tax Update:January 2017/Indonesia)
This new regulation on the documentation requirement essentially introduces the 3 (three) tiered approach to documentation consistent with the BEPS Action 13 recommendations, provides a threshold on the maintenance of such documentation, and requires the documentation to be submitted in the local language, i.e. Bahasa Indonesia. The regulation provides detailed guidance on who should prepare it, what it should include and when such documentation should be made available.
This regulation is issued primarily in relation to the transfer pricing documentation requirements and does not override the existing transfer pricing regulations governing the application of the arm’s length principle, i.e. Directorate General of Taxation (“DGT”) Regulation No. PER-43/PJ/2010 (as amended by DGT Regulation No. PER-32/PJ/2011).
This Alert summarises the salient features of PMK-213 and provides insight on the requirements for Taxpayers in Indonesia in relation to their transfer pricing documentation obligation.