The transfer pricing dispute of PT. Teckno Dua Indonesia (TDI) provides a crucial lesson on the urgency of consistency between ex-ante documentation and the actual realization of affiliated transactions. Under Article 18 paragraph (3) of the Income Tax Law, tax authorities are empowered to redetermine the amount of income if transactions between related parties do not adhere to the Arm's Length Principle (ALP). In this case, the crux of the dispute was not the existence of the transaction itself, but the validity of using target margin values from a budgeted segmented report that the Taxpayer had voluntarily established in their Local File.
The core conflict began when the Respondent (DJP) issued a positive correction on PT. TDI's gross revenue amounting to IDR 35.16 billion for the 2018 Fiscal Year. DJP applied a gross mark-up margin of 7.64%, sourced directly from PT. TDI's own Budgeted Segmented Report as an internal comparable. Conversely, PT. TDI contested the correction, arguing that the 7.64% figure was merely an initial estimate, while actual realization showed a negative margin (-0.39%) due to global palm kernel oil price fluctuations and the company's status being in the early operational trial phase. PT. TDI emphasized that according to PER-32/PJ/2011, ALP testing should utilize actual data that has truly occurred.
The Tax Court Judges, in their legal consideration, highlighted that the Local File is the manifestation of the ALP application performed by the Taxpayer, as regulated under PMK 213/2016. The Judges found that when PT. TDI prepared the Local File, the actual financial data for Fiscal Year 2018 was already available. Nevertheless, PT. TDI consciously chose and designated the Budgeted Report as the basis for the Cost Plus Method (CPM) within that document. The inconsistency between the transfer pricing policy stated in the formal document and the actual field practice caused the Taxpayer's arguments to lose evidentiary weight before the Bench.
The implication of this decision reaffirms that Transfer Pricing Documentation is not merely an administrative compliance requirement but a substantial evidentiary instrument. Taxpayers cannot unilaterally disregard the parameters they have set themselves in the Local File when facing audits or objections. This ruling serves as a reminder for business entities to ensure that functional analysis and the selection of comparable data in TP Documents reflect economic realities that can be accounted for actually.
In conclusion, the Panel of Judges rejected PT. TDI's entire appeal because the Taxpayer was deemed to have failed in proving that their transactions with affiliated parties followed the fairness parameters they had outlined themselves. Compliance with the ALP demands synchronization between planning, documentation, and transaction execution to mitigate the risk of material corrections in the future.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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