PMK 172 Tahun 2023 - APA

The Director General of Taxes is authorized to make an APA with a Taxpayer or the Competent Authority of a Treaty Partner. [Article 55 paragraph (1)]

To determine an Arm's Length Transfer Price in accordance with the Arm's Length Principle applicable for a certain period. [Article 55 paragraph (1)]

Unilateral APA (between Taxpayer and DGT) and Bilateral/Multilateral APA (between DGT and Treaty Partner Tax Authority). [Article 55 paragraph (3) letter a]

Yes, Taxpayers can request a Roll-back in the APA application. [Article 55 paragraph (4)]

a. Facts and conditions of transactions do not differ materially from those agreed in the APA;

b. The statute of limitations has not expired;

c. No Corporate Income Tax Assessment Letter (SKP) has been issued; and d. No investigation of tax crime is currently underway. [Article 55 paragraph (6)]

Criteria for determining Transfer Price and the determination of Transfer Price in advance. [Article 55 paragraph (7)]

Basic assumptions affecting transfer pricing determination, covering contractual terms, FAR (Functions, Assets, Risks) analysis, transaction/business characteristics, and economic conditions. [Article 55 paragraph (8) letter e & paragraph (9)]

Yes, the Taxpayer must have fulfilled the obligation to submit Annual Corporate Income Tax Returns for 3 consecutive tax years prior to the application. [Article 56 paragraph (1) letter a]

Yes, the Taxpayer must have maintained and stored Master File and Local File for the last 3 tax years. [Article 56 paragraph (1) letter b]

No, the Taxpayer must not be under investigation, prosecution, or serving a criminal sentence in taxation. [Article 56 paragraph (1) letter c]

Yes, the proposed operating profit must not be lower than the average operating profit reported in the Tax Returns of the last 3 years, unless there is a technical explanation and strong economic reason. [Article 56 paragraph (1) letter e & paragraph (4)]

The application is submitted within a period of 6 to 12 months before the start of the APA Period. [Article 56 paragraph (3) letter c number 1]

The DGT conducts a completeness check of formal and material requirements. [Article 57 paragraph (1)]

No later than 1 (one) month after the application receipt date. [Article 57 paragraph (2)]

Financial statements audited by a public accountant for the last 3 tax years. [Article 58 paragraph (3) letter a]

The DGT issues a notification of termination of the Bilateral APA process, and the Taxpayer may re-apply as a Unilateral APA. [Article 57 paragraph (4)]

Discussions with the Taxpayer, site visits, management/employee interviews, and requests for additional data. [Article 59 paragraph (2)]

Yes, the DGT is authorized to request an exchange of tax information. [Article 59 paragraph (2) letter f]

The DGT may conduct an Audit for other purposes (not related to transactions applied for in the APA) or for tax years that have never been audited regarding the Roll-back application. [Article 59 paragraph (3) & (4)]

No later than 6 months since the Taxpayer submits the complete application. [Article 60 paragraph (2) letter a]

Must be completed within 12 months from the start of negotiations. [Article 60 paragraph (2) letter b]

Completed within the timeframe according to the Mutual Agreement Procedure (MAP) provisions. [Article 60 paragraph (3)]

If the transaction is not based on economic motives, the economic substance differs from its form, or is done to minimize tax burden, or if the information submitted is incorrect. [Article 61 paragraph (2)]

A Decree on the Implementation of Advance Pricing Agreement is issued by the Director General of Taxes. [Article 61 paragraph (7) & (8)]

Yes. The Taxpayer can apply for a Unilateral APA no later than 14 calendar days after the written notification of Bilateral process termination. [Article 62 paragraph (1)]

Yes, withdrawal is submitted in writing before an agreement is reached. [Article 63 paragraph (1) & (2)]

No, a withdrawn application cannot be re-submitted for the same tax year. [Article 64 paragraph (5)]

The Taxpayer must rectify the Annual Corporate Income Tax Return no later than 1 month after the APA Decree is issued and pay the shortage. [Article 66 paragraph (3) letter c]

Yes, administrative sanctions (interest/fines) are waived according to the KUP Law provisions. [Article 66 paragraph (6) letter d]

The DGT does not conduct corrections on Transfer Pricing for transactions covered in the APA as long as the Taxpayer implements it according to the agreement. [Article 67 paragraph (2)]

Yes, the Director General of Taxes is authorized to evaluate compliance with the agreement execution and criteria conformity. [Article 68 paragraph (1) & (2)]

The DGT may conduct a Review of the Advance Pricing Agreement. [Article 68 paragraph (7) letter a]

If there is an indication that the Taxpayer submitted information/evidence that is incorrect or not in accordance with actual conditions. [Article 70 paragraph (1)]

The agreement is deemed to have never existed, and the DGT may conduct an Audit or Investigation for those years. [Article 70 paragraph (7)]

Material changes in facts/transaction conditions, changes in critical assumptions, or a request from the Taxpayer itself. [Article 69 paragraph (1) & (3)]

Yes, through the Transfer Pricing Agreement Renewal mechanism. [Article 71 paragraph (1)]

Within a period of 12 months to 6 months before the APA Period expires. [Article 71 paragraph (2)]

Renewal can only be granted 1 (one) time for 1 (one) Advance Pricing Agreement Period. [Article 71 paragraph (11)]

The procedures (completeness, material testing, negotiation) apply mutatis mutandis (adjusted to the initial application procedure). [Article 71 paragraph (10)]

WP Belum Terdaftar memiliki tahap penerbitan SPHPP sebelum pembahasan akhir, sedangkan WP Terdaftar langsung pembahasan setelah tanggapan. (Referensi: Slide 14)

Can be done directly, via post/expedition, or electronically. [Article 72 paragraph (1)]

Yes, if the system is available, document submission is done within that system. [Article 72 paragraph (2)]

Yes, if the system is available, document submission is done within that system. [Article 72 paragraph (2)]

Yes, the Director General of Taxes may delegate authority to officials within the DGT. [Article 55 paragraph (2)]

Yes, through a written notification from the DGT regarding a Bilateral APA application submitted by a foreign tax subject to the Treaty Partner Competent Authority. [Article 55 paragraph (3) letter b]

Yes, through a written notification from the DGT regarding a Bilateral APA application submitted by a foreign tax subject to the Treaty Partner Competent Authority. [Article 55 paragraph (3) letter b]

Indonesian language. [Article 56 paragraph (3) letter a]

The management whose name is listed in the deed of establishment or deed of amendment. [Article 56 paragraph (3) letter b]

Yes, it must be attached to the application. [Article 56 paragraph (3) letter d number 1]

Yes, the DGT is authorized to request an appraisal activity. [Article 59 paragraph (2) letter h]

Yes, the DGT is authorized to request an appraisal activity. [Article 59 paragraph (2) letter h]

21 (twenty-one) calendar days after the date of the notification letter. [Article 70 paragraph (2)]

The DGT immediately issues a decree cancelling the Advance Pricing Agreement. [Article 70 paragraph (5)]

The application is submitted using the form format listed in Appendix Letter L. [Appendix Letter L]

Taxpayer Identity, Proposed Transfer Pricing Agreement, and History of Affiliated Transactions for the last 3 years. [Appendix Letter L Sections A, B, C]

Filled with the starting tax year up to the ending tax year proposed to be covered. [Appendix Letter L Instruction No. 5]

The Taxpayer must tick the "Yes" box in the Roll-back column and list the specific tax years proposed (can be more than one year). [Appendix Letter L Instruction No. 6]

Name of the Affiliated Party and the Treaty Partner Country/Jurisdiction where the party is domiciled. [Appendix Letter L Instruction No. 10 & 11]

Yes, the name of the party in the affiliated transaction designated as the tested party for its transfer pricing indicator must be listed. [Appendix Letter L Instruction No. 13]

Description of functions, assets, and risks, for example as a full manufacturer, limited distributor, or service provider. [Appendix Letter L Instruction No. 14 & 15]

The arm's length range value (e.g., interquartile range) according to the Arm's Length Principle for the covered transactions. [Appendix Letter L Instruction No. 17]

Transaction values, TP methods used, and pricing policies applied for each affiliated transaction during the 3 (three) tax years prior to the application. [Appendix Letter L Instruction No. 19-30]

Yes, the Taxpayer must declare the availability status ("Yes/No") of the Master File, Local File, and CbCR for the last 3 tax years. [Appendix Letter L Section D Item 4]

Yes, the Taxpayer must fill in the statement of audit, objection, and appeal status related to transfer pricing in the last 3-5 years. [Appendix Letter L Section D Item 5-7]

A statement letter of willingness to complete documents and a statement letter of willingness to implement the agreement. [Appendix Letter L Section G]

Used if the APA application is submitted by a Taxpayer whose business is negatively affected by a national disaster (e.g., pandemic). [Appendix Letter M Title]

The "Impacted by National Disaster" column and the "Adjustment to Normal Condition" column. [Appendix Letter M Projection Table]

To show the profit level resulting from adjustments to normal conditions which will be the basis for the agreement. [Article 56 paragraph (6) jo. Appendix Letter M]

Gross Profit/Net Sales, Gross Profit/COGS, Operating Profit/Net Sales, and Operating Profit/(COGS+Operating Expenses). [Appendix Letter M Ratio Table]

To provide a detailed and technical explanation of the application of the Arm's Length Principle for the proposed transactions. [Appendix Letter N]

Group ownership structure, list of affiliated parties, business processes, value chain, and organization structure up to the manager level. [Appendix Letter N Item 1]

Analysis of functions, assets, and risks (FAR) and reasons why other affiliated transactions are not proposed in the APA. [Appendix Letter N Item 2]

Yes, the Taxpayer must describe the proposed adjustment mechanism (compensating adjustment) if the actual profit differs from the agreement. [Appendix Letter N Item 3 Letter e]

Yes, a description of the critical assumptions proposed to be agreed upon must be included. [Appendix Letter N Item 3 Letter d]

An example format of the Unilateral Advance Pricing Agreement Text between the Director of International Taxation and the Taxpayer. [Appendix Letter O]

If the Taxpayer's actual profit is lower than agreed, the Taxpayer is required to make a positive adjustment to increase the taxable profit to the agreed point (e.g., median). [Appendix Letter O Item 4 Letter a]

If the Taxpayer's actual profit is higher than agreed, the Taxpayer has the right to make a negative adjustment to decrease the taxable profit to the agreed point. [Appendix Letter O Item 4 Letter b]

It must be included in the Annual Corporate Income Tax Return during the APA Period. [Appendix Letter O Item 4 Letter c]

No material changes in contractual terms, functions-assets-risks, business characteristics, and economic conditions. [Appendix Letter O Item 6]

Yes, books, records, and documents forming the basis of the APA must be kept and submitted within 1 month if evaluated. [Appendix Letter O Item 10]

Transfer Pricing Agreement Review Application Form according to Appendix Letter S. [Appendix Letter S]

Changes in business model, changes in FAR profile, or business group restructuring affecting critical assumptions. [Appendix Letter S Section C]

Decree on Amendment to the Decree on APA Implementation (Appendix T for Unilateral, Appendix U for Bilateral). [Appendix Letter T & U]

Cancellation Decree according to Appendix Letter V. [Appendix Letter V]

Revoking the previous APA Implementation Decree, so the agreement is deemed to have never existed. [Appendix Letter V Second Dictum]

To apply for a renewal of an APA that is about to expire. [Appendix Letter W]

Must be submitted 12 to 6 months before the APA period expires. [Article 71 paragraph (2) jo. Appendix Letter W]

Must be submitted 12 to 6 months before the APA period expires. [Article 71 paragraph (2) jo. Appendix Letter W]

Comparison of agreed transfer pricing indicator values, those proposed in the renewal, and historical realization (including compensating adjustment values). [Appendix Letter W Section C]

Yes, must describe the comparison of the business model of the previous period with the period proposed for renewal. [Appendix Letter W Section D]

An adjustment made by the Taxpayer at the end of the tax year to adjust the reported taxable income to be in accordance with the Advance Pricing Agreement (APA) or the Arm's Length Principle. [Appendix Letter L Item 4 & Appendix Letter N]

This adjustment is performed at the end of the tax year (before the Annual Corporate Income Tax Return is reported). [Appendix Letter L Item 4]

Yes, in the APA agreement text, the implementation procedure includes a clause that the Taxpayer will perform a compensating adjustment if the realization of the transfer pricing indicator differs from what was agreed. [Appendix Letter N Item 4]

An adjustment made when the Transfer Pricing indicator value (e.g., operating profit) actually obtained by the Taxpayer is lower than the value that should have been obtained based on the agreement/arm's length principle. [Appendix Letter N Item 4 letter a]

The Taxpayer is required to make a positive adjustment to increase the profit/taxable income until it reaches the arm's length point (or a point within the arm's length range) agreed upon. [Appendix Letter N Item 4 letter a]

An adjustment made when the Transfer Pricing indicator value actually obtained by the Taxpayer is higher than the value that should have been obtained based on the agreement. [Appendix Letter N Item 4 letter b]

Yes, in the PMK 172 APA text format, the Taxpayer is stated to have the right to perform a negative adjustment to decrease profit until it reaches the agreed arm's length point (e.g., median or specific quartile), provided it is in accordance with the agreement. [Appendix Letter N Item 4 letter b]

The adjustment is made by observing the agreed Critical Assumptions. If the critical assumptions are still met, then the adjustment can be made to achieve the price indicator target. [Appendix Letter N Item 4]

The adjustment is made to achieve the Transfer Pricing indicator value at the arm's length point or a point within the arm's length range (e.g., Quartile 1, Median, or Quartile 3) as specifically agreed in the APA text. [Appendix Letter N Item 4 letters a & b]

In principle, a compensating adjustment is reflected in the reporting of taxable income (fiscal). In the context of APA, this adjustment is made to "adjust the reported taxable income". [Appendix Letter L Item 4]

PMK 172 does not explicitly regulate VAT invoice revisions for compensating adjustments in its body. However, compensating adjustments are typically profitability adjustments at year-end which are often treated as fiscal adjustments, unless the Taxpayer chooses to issue debit/credit notes changing the underlying transaction price.

If performed in accordance with the applicable Advance Pricing Agreement (APA) and correctly reported in the Tax Return, the Taxpayer is considered compliant with the agreement and avoids audit corrections on issues covered by the APA. [Article 66 paragraphs (1) & (2) - implied regarding APA compliance]

Yes, by submitting a withdrawal letter according to the format in Appendix Letter R. [Appendix Letter R]

Must be signed by the management whose name is listed in the deed. [Appendix Letter R Instruction No. 14]