Complete Guide to CbCR Notification and Instructions for Filling it Out According to PMK 172 of 2023

In the international tax and transfer pricing landscape, transparency is key. One of the main instruments of such transparency is the Country-by-Country Report (CbCR). However, before a business group submits the CbCR, there is an administrative obligation that is often overlooked but very crucial: CbCR Notification.

What is CbCR Notification?

CbCR Notification is a notification submitted by a corporate Taxpayer to the Directorate General of Taxes (DGT) stating their obligation status within a multinational business group—whether they have an obligation to submit CbCR or not, as well as identifying who the Parent Entity (Ultimate Parent Entity) of said group is.

Based on Article 23 paragraph (1) of PMK 172/2023, a domestic Taxpayer who is a member of a Business Group or who has Affiliated Transactions covered in the country-by-country report is required to submit a notification to the DGT.

Important to note: Although the Taxpayer might not be required to submit the CbCR document (for example because they are not the Parent Entity), they are still required to submit the CbCR Notification to inform the DGT regarding the identity of their Parent Entity and in which country said CbCR will be reported.

When and How to Submit It?

Deadline

The CbCR Notification is mandatory to be submitted to the DGT within a deadline of no later than 12 (twelve) months after the end of the Tax Year. Example: If the tax year ends on December 31, 2023, then the CbCR Notification is mandatory to be submitted no later than December 31, 2024.

Submission Mechanism

Submission is done electronically through the Taxpayer Portal (Coretax). If the Taxpayer also has an obligation to submit the CbCR document (as a Parent Entity or Surrogate), then the CbCR submission is done simultaneously with the submission of said notification on the same portal. Once successful, the Taxpayer will receive an Electronic Receipt.

Structure of Notification (Based on Attachment C of PMK 172/2023)

The notification format is specifically regulated in Attachment Letter C of PMK 172/2023. Here is the filling guide per section:

A. Tax Year and Identity

• Tax Year: Fill in the reported tax year digits (e.g., 2023).
• Bookkeeping Period: Fill in the start and end dates of bookkeeping.
• Identity: Fill in the Taxpayer Name and TIN (NPWP) according to the TIN card.

B. Part I: Identification of Taxpayer as Parent Entity (UPE)

This part is filled IF the reporting Taxpayer is the Parent Entity (Ultimate Parent Entity/UPE) of the Business Group. Check the appropriate box (A-1 to A-4) if meeting the following criteria:

• Has one or more other members in the Business Group.
• Required to compile consolidated financial statements.
• Not owned by another entity within the group (located at the peak of the structure).
• Has a consolidated gross turnover in the previous tax year of at least Rp11,000,000,000,000.00 (eleven trillion rupiah).

If the Taxpayer checks this part, it means the Taxpayer declares themselves as the UPE and is required to submit the complete CbCR document, not just the notification.

C. Part II: Identification of Taxpayer Not Parent Entity

This part is filled by a domestic Taxpayer (including Permanent Establishment/BUT) who is not a Parent Entity. This is the most common scenario for subsidiaries of MNEs in Indonesia.

Statement C-1 (Group Gross Turnover): The Taxpayer must confirm whether its Parent Entity has a consolidated gross turnover of:

• More than/equal to Rp11 Trillion / €750 Million; or
• Less than said value. Tips: If less than said value, the group CbCR obligation is void, but the notification still needs to be filled to state such matter.

Statement C-2 (Parent Entity Domicile): Whether the Parent Entity is a Domestic or Foreign tax subject.

• If Foreign, whether the UPE domicile country requires CbCR or not.

Statement D (Parent Entity Data): The Taxpayer must fill in the actual Parent Entity data:

• Parent Entity Name.
• Parent Entity TIN (Tax Identification Number).
• Country/Jurisdiction of Parent Entity domicile.
• Consolidated gross turnover value. Note: If the UPE functional currency is other than Rupiah, convert to Euro using the exchange rate on January 1, 2023.

Statement E (Substitute Entity/Surrogate): Filled ONLY IF the Parent Entity abroad appoints another entity (Surrogate Parent Entity) to submit the CbCR. If there is no appointment, leave blank.

D. Part III: Statement of Obligation (Conclusion)

This is the crucial part to determine the final status of the Taxpayer's obligation. Choose one of four options (F-1 to F-4):

• F-1: Taxpayer is a Parent Entity and is required to submit CbCR.
• F-2: Taxpayer is a Parent Entity, but is not required to submit CbCR (e.g., consolidated turnover under Rp11 Trillion). Must include reason.
• F-3: Taxpayer is not a Parent Entity, but is required to submit CbCR (Local Filing). Condition: Occurs if the UPE abroad does not require CbCR, there is no exchange of information (AEoI) with Indonesia, or information exchange failure.
• F-4: Taxpayer is not a Parent Entity and is not required to submit CbCR. This is the option most frequently chosen by subsidiaries of MNEs in Indonesia. Must fill in the reason, example: "CbCR submitted by Parent Entity in [Country Name]".

Use of Exchange Rate for Taxpayers with Foreign Currency Bookkeeping

For Domestic Taxpayers with the status of Parent Entity (UPE) and who have obtained permission from the Minister of Finance to organize bookkeeping using a foreign language and currency other than Rupiah (e.g., USD), there is a special rule in calculating whether the consolidated gross turnover has passed the threshold of Rp11,000,000,000,000.00 (eleven trillion rupiah).

Based on Article 16 paragraph (8) of PMK 172 of 2023, the conversion of gross turnover value into Rupiah must use: The exchange rate determined by the Minister of Finance (Kurs KMK) for tax calculation at the end of the relevant Tax Year.

Calculation Example:

Sanctions for Non-Compliance

Is there a sanction if one forgets to report the CbCR Notification? Yes. Article 28 of PMK 172/2023 asserts that Taxpayers who do not fulfill the notification submission obligation (Article 23) are subject to sanctions in accordance with the provisions of laws and regulations in the field of taxation. This failure can also trigger DGT risk analysis and further tax audits.

CbCR Notification is the gateway to transfer pricing compliance. Ensure you correctly identify:

1. Who the Ultimate Parent Entity (UPE) of your group is.
2. Whether the group consolidated turnover is above the threshold (€750 Million / Rp11 Trillion).
3. Whether the UPE domicile country has a CbCR exchange agreement with Indonesia.

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.