Dissecting the Content of the Master File According to PMK 172/2023

The Master File is a document that provides a general overview of the Business Group globally. This document aims to provide context to tax authorities regarding how the business group operates, creates economic value, and its overall transfer pricing policies.

1. Structure and Ownership Chart of Business Group

This section provides a visual and legal overview of group members. Information that is mandatory to include covers:

[Image of corporate ownership structure chart]

• List of Shareholders: List of shareholders and their ownership percentages, as well as the list of management of each Business Group member.
• Ownership Chart: A chart showing the overall share ownership relationship of Business Group members.
• Geographic Location: The country or jurisdiction where each Business Group member is located.

2. Business Activities Conducted

This is the most substantial section explaining how the group generates money (profit drivers). Details that are mandatory to be included are:

• Profit Determinants: Explanation regarding important factors determining the profit of each group member.
• Supply Chain: Explanation and business chain scheme/diagram for the 5 (five) largest products/services based on turnover, as well as other products contributing 5% or more of the group's total gross turnover.
• Important Service Agreements: List and explanation regarding service contracts between group members (other than R&D), including the service provider's capabilities and its cost allocation policy.
• Main Markets: Explanation regarding the geographic location of the main markets for the group's products/services.
• Group Functional Analysis: General explanation regarding functions, assets, and risks performed by the group, explaining the contribution of each group member in value creation.
• Restructuring: Explanation regarding business restructuring, acquisitions, and divestments occurring during the last 5 years.

3. Intangible Property (IP)

Given that IP is often a tool for profit shifting, this section requests very specific details:

• IP Strategy: Explanation of the group's strategy in the development, ownership, and exploitation of IP, including the location of R&D facilities and their management.
• List of Important IP: List of IP important for transfer pricing analysis and which entities legally own them.
• List of IP Agreements: List of contracts between group members related to IP, including Cost Contribution Arrangements (CCA), research services, and licenses.
• IP Transfer Pricing Policy: Explanation of the group's transfer pricing policy regarding R&D and IP.
• IP Transfers: Explanation regarding the transfer of IP ownership between group members in the relevant tax year, including its compensation.

4. Financial and Financing Activities

This section explains how the group is funded:

• External Financing: Explanation regarding group financing, including agreements with independent lenders.
• Financial Center (Treasury Center): Identification of group members performing financing center functions, including their domicile and place of effective management.
• Financial Transfer Pricing Policy: Explanation regarding transfer pricing policy concerning financing between group members.

5. Financial Statements and Tax Positions

Supporting information in the form of quantitative data and compliance:

• Consolidated Financial Statements: The business group's consolidated financial statements for the relevant tax year.
• APA and Tax Rulings: List and brief explanation regarding unilateral Advance Pricing Agreements (APA) and other tax rulings related to income allocation between countries.

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.