Complete Guide to TP Doc Obligations: Thresholds, Deadlines, and Case Studies

The issuance of PMK 172 of 2023 reaffirms Indonesia's commitment to implementing global tax transparency principles. One of its main pillars is the obligation for Taxpayers to organize Transfer Pricing Documentation (TP Doc) to prove that their affiliated transactions are in accordance with the Arm's Length Principle (PKKU).

1. Three-Tiered Documents (Three-Tiered Approach)

In accordance with BEPS Action 13 standards, Indonesia mandates three types of transfer pricing documents:

1. Master File: Information regarding the business group globally.
2. Local File: Detailed information regarding the local Taxpayer's transactions.
3. Country-by-Country Report (CbCR): Allocation of income and taxes of the business group per jurisdiction.

2. Who is Required to Create Master File (MF) and Local File (LF)?

Not all companies having affiliated transactions are required to create complete documents. This obligation only applies if the Taxpayer meets one of the following thresholds in the Previous Tax Year:

A. Gross Turnover Threshold

Taxpayers having a gross turnover value (sales) in the previous tax year of more than Rp50,000,000,000.00 (fifty billion rupiah).

B. Affiliated Transaction Value Threshold

If turnover is below Rp50 Billion, the Taxpayer is still required to create MF and LF if the affiliated transaction value of the previous year meets the following limits:

• More than Rp20,000,000,000.00 (twenty billion rupiah) for tangible goods transactions; OR
• More than Rp5,000,000,000.00 (five billion rupiah) for each provision of services, interest payments, utilization of intangible goods, or other affiliated transactions.

C. Transactions with Parties in Low Tax Countries

If the Taxpayer carries out transactions with affiliated parties located in a country/jurisdiction with an income tax rate lower than the Indonesian tax rate (currently 22%), then they are required to create MF and LF without looking at turnover limits or transaction values.

3. Who is Required to Create CbCR?

The CbCR obligation applies specifically to:

• Parent Entity: A domestic Taxpayer who becomes the parent entity of a Business Group having a consolidated gross turnover of at least Rp11,000,000,000,000.00 (eleven trillion rupiah).
• Constituent Entity: Under certain conditions (e.g., parent abroad is not required to do CbCR or there is no exchange of information), a subsidiary entity in Indonesia may be required to submit CbCR.

Case Study of Obligation Calculation (Based on Attachment Letter A of PMK 172/2023)

The following is an official example of threshold application as stated in Attachment Letter A of PMK 172/2023.

Deadlines: "Available" vs "Submitted"

PMK 172/2023 distinguishes between document availability time and submission time.

When Must It Be Available? (Ex-Ante):

The Master File and Local File must be available no later than 4 (four) months after the end of the Tax Year. Example: If book closing is December 31, 2023, the document must be ready on April 30, 2024. The document must be accompanied by a statement letter of availability signed by the management.

When Must It Be Submitted?

Physical documents/complete softcopies are only submitted if requested by the DGT (during supervision or audit). The submission period is 1 (one) month from the request.

Reporting in Annual Tax Return

Taxpayers only need to attach the Summary of Master File and Local File to the Corporate Annual Tax Return. This summary contains a statement that the documents were available according to the determined date.

Conclusion

Taxpayers must be careful in calculating TP Doc obligation thresholds every year. As seen in Case 1, a decrease in turnover below Rp50 Billion does not automatically erase the obligation if there are service, interest, or royalty transactions exceeding Rp5 Billion. Failure to provide documents on time (4 months after book closing) can cause documents to be considered as not meeting provisions, giving authority to the DGT to determine tax ex officio.

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.