The transfer pricing dispute involving PT YMMI highlights the tax authority's rigidity in applying the median value (Q2) as the basis for adjustments on affiliated transactions. The primary focus of this dispute was a VAT export base adjustment of IDR 22.4 billion, derived from a secondary adjustment where operational profits were deemed below arm's length. The Respondent insisted on using the median point because the Petitioner’s profit fell below the first quartile (Q1). However, this argument was overturned by the Board of Judges, who referenced the principle of comparable availability.
The core conflict centered on the selection and number of comparables. The Respondent applied the TNMM method using only two comparable companies but still enforced the use of the median value. The Petitioner countered, arguing that as a contract manufacturer, it carries low risk and its profit (3.51% FCMU) remained within the arm's length range if appropriate comparables were used. The legal resolution was reached by the Board of Judges by referring to PMK-22/PMK.03/2020. Given that only two comparables were available, the Board emphasized that the "full range" (minimum to maximum values) must be used, rather than the interquartile range or median. Since the Petitioner’s profit was within that full range, the Respondent's adjustment was ruled baseless.
The implication of this ruling confirms that tax authorities cannot automatically adjust to the median point when the number of comparables is limited. For taxpayers, this success provides a vital lesson on maintaining robust functional analysis and a deep understanding of the hierarchy of arm's length range selection in domestic regulations.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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