Technical Guide to CbCR Reporting: Criteria, Content, and Calculation Case Studies According to PMK 172/2023

In the framework of three-tiered Transfer Pricing documentation (three-tiered approach), the Country-by-Country Report (CbCR) is a document that provides a global overview regarding the allocation of income, taxes paid, and economic activities of a business group.

Unlike the Master File and Local File which are transactional and narrative, CbCR is aggregate and quantitative. Here are the details of obligations, technical filling, and reporting case studies.

Reporting Criteria: Who Must Submit?

The obligation to submit CbCR is divided into two main categories based on Article 16 of PMK 172/2023:

A. Primary Obligation (Primary Filing)

A domestic Taxpayer having the status of Parent Entity (Entitas Induk) of a Business Group is required to submit CbCR if it has a Consolidated Gross Turnover in the Tax Year preceding the reported Tax Year of at least Rp11,000,000,000,000.00 (eleven trillion rupiah).

B. Secondary Obligation (Local Filing)

A domestic Taxpayer who is not a Parent Entity (only a group member/constituent entity) is required to submit CbCR if its Parent Entity is located abroad and meets one of the following conditions:

• The domicile country of the Parent Entity does not require the submission of CbCR;
• The domicile country of the Parent Entity does not have a tax information exchange agreement with Indonesia; or
• There is an agreement, but a failure of information exchange occurs (The CbCR Report cannot be obtained by the Government of Indonesia).

CbCR Notification Obligation

Availability and Reporting Time

The CbCR schedule differs from the Master File and Local File:

• Availability: CbCR must be available no later than 12 months after the end of the Tax Year.
• Reporting: Taxpayers are required to submit the CbCR along with the Notification electronically (XML) through DGT Online no later than 12 months after the end of the Tax Year.
• Tax Return Attachment: The CbCR submission receipt is mandatory to be attached to the Corporate Income Tax Annual Return for the Following Tax Year.

Calculation Case Study of Obligation

Here is an official illustration of the CbCR threshold application based on Attachment Letter A Number 3 of PMK 172/2023:

Obligation Analysis:

Conclusion: Determination of CbCR obligations always looks at the consolidated turnover of the previous year (preceding year), not the current year.

Form and Content of CbCR Forms

Based on Article 31 and Attachment of PMK 172/2023, CbCR consists of Working Papers and three main forms which must be filled without decimals for currency values:

A. Working Paper (Working Paper) - Attachment Letter H

Taxpayers must compile a working paper first containing details per constituent entity before aggregation.

B. Form CBC-1: Income & Tax Allocation - Attachment Letter F

Presents aggregate (combined) data of all entities per country/jurisdiction:

• Gross Income: Separated between Independent Parties, Affiliated Parties, and Total. Note: Does not include dividends from affiliated parties.
• Profit (Loss) Before Tax.
• Income Tax Withheld/Collected/Self-Paid (Cash Basis).
• Income Tax Payable (Accrued): Only current tax expense, excluding deferred tax.
• Capital & Accumulated Retained Earnings.
• Number of Permanent Employees.
• Tangible Assets: Other than cash and cash equivalents.

C. Form CBC-2: List of Group Members

Contains a list of names of all business group members grouped per tax domicile country, and checking the type of their main business activities (e.g., R&D, Manufacturing, Sales, Services, Holding, etc.).

D. Form CBC-3: Additional Information

Narrative entries to provide important explanations, such as data sources used (consolidated/statutory), exchange rate assumptions, or explanations of "Other" business activities.

XML Reporting Format

CbCR reporting is not done by uploading a PDF, but using a specific XML (eXtensible Markup Language) scheme. Taxpayers must form an XML file based on the working papers and forms above, then upload it in the CbCR feature on DGT Online.

References

Ministry of Finance of the Republic of Indonesia. (2023). Regulation of the Minister of Finance Number 172 of 2023 concerning the Application of the Principle of Fairness and Business Prevalence in Transactions Influenced by a Special Relationship.