Strategies to Win Affiliate Service Fee Disputes: Lessons from the SAP and ToPS Utilization Case of PT ITS

Corrections to intra-group service fees are frequently a critical focal point in transfer pricing audits conducted by tax authorities, particularly concerning the validation of existence and economic benefit (the benefit test). In this dispute, the Directorate General of Taxes (DJP) performed a positive correction on information system service fees paid to an affiliate in the Netherlands, contending a lack of tangible proof that services were rendered. DJP emphasized Article 18 paragraph (3) of the Income Tax Law and SE-50/PJ/2013, requiring highly detailed documentation to prove the expenses were genuinely incurred to obtain, collect, and maintain income (3M).

The Taxpayer countered by arguing that the SAP and ToPS systems constitute vital infrastructure integrating all production and financial reporting processes with global standards. Without access to these systems, daily operations could not be conducted efficiently. The Taxpayer presented comprehensive evidence, ranging from service agreements and invoices to practical proof of application usage in operations. The Panel of Judges ultimately agreed with the Taxpayer, ruling that the provided evidence was sufficient to demonstrate both the economic benefit and the existence of the transaction. This decision reaffirms that as long as a Taxpayer can prove a direct link between affiliate service fees and business operations, such costs are fiscally deductible.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here