The transfer pricing dispute involving PT TBI provides a crucial lesson on the application of the Arm’s Length Principle during a global crisis. The core conflict arose when the Respondent (Tax Authority) adjusted the company’s operating profit using the Transactional Net Margin Method (TNMM) based on current-year (2020) comparable data.
The Respondent claimed that the Petitioner’s TP Doc failed to reflect the economic conditions of the pandemic by using historical data. In contrast, the Petitioner argued that their selection followed the ex-ante principle (using data available at the time of the transaction) as per PMK-213/2016. They emphasized that the losses were a logical result of the 48.3% decline in the national automotive market.
The Board of Judges highlighted the Respondent’s inaccuracy in the correction formula. The Board deemed the use of single-year 2020 data substantively inappropriate because it violated the logic of data availability at the time of the transaction. The Board also recognized the necessity of adjustments for unused production capacity (idle capacity) as a valid external factor, aligning with OECD guidelines.
This decision reaffirms that formal compliance with ex-ante TP Doc holds strong legal weight. It serves as an important precedent for Taxpayers to always document the impact of external factors in detail and perform appropriate economic adjustments (such as idle capacity) to defend their arm’s length profitability during audits.
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