|DANNY DARUSSALAM Tax Center|
|Hadiputranto, Hadinoto & Partners|
|PB Taxand, Taxand Indonesia|
The Indonesian tax office has actively been involved in implementing the guidance in the BEPS action points, especially country-by-country reporting (CbCR) and the automatic exchange of information.
The government has announced it will implement automatic exchange of information in September 2017, earlier than the original plan of September 2018. The timeline for CbCR implementation is more uncertain, however the Directorate General of Tax (DGT) has already informally conveyed an intention to adapt its TP documentation requirement to reflect the BEPS recommendation.
Further changes to transfer pricing are also on the horizon in Indonesia. "We predict that the government is going to revise the arm's-length principle application regulations, specifically on the areas of intangibles, intra-group services, transaction on commodities, and the possibility of safe harbour," said Danny Septriadi, senior partner at DANNY DARUSSALAM Tax Centre.
Numerous transfer pricing practitioners have expressed concern over the greater focus on the TP issues by the DGT during recent years. "More and more taxpayers are realising that there is a need to prepare adequate transfer pricing documentation as a first line of defence against challenges from the Indonesian Tax Office (ITO)," said Iwan Hoo, head of transfer pricing at KPMG. "As the ITO is becoming more sophisticated, its challenges are now often supported by its own economic analyses, although the more common adjustments to service and royalty charges remain a common occurrence," he added.
Moreover, Ponti Partogi, head of tax and transfer pricing at Hadiputranto, Hadinoto & Partners has observed that the transfer pricing market will still be a hot topic in the coming years as the tax authorities are focusing more on transactions with affiliates. "I believe that this is only the beginning. There will be more and more attention given to affiliate transactions soon and therefore it is imperative that the taxpayers should be more careful and be prepared in dealing with affiliated transactions," he added. The emphasis is on the tax authorities' enhanced ability in handling transfer pricing cases, in terms of audit skills, knowledge and experiences.
As an alternative transfer pricing dispute resolution, the government introduced a mutual agreement procedure (MAP) process in late 2014 and revised the advance pricing agreement (APA) process in 2015.
"MAP is gaining popularity as an alternative solution to dispute resolution or in addition to the domestic objection and appeal process," said Hoo.
The latest APA regulation updated the 2010 procedure and implementation and included additional details required for the APA submission, the application forms that must be prepared by the taxpayer and completion deadlines of APA.
DGT has set up a new international tax department with one of its specific purposes being the managing of APA and MAP.
"In the coming years, the APA should be used as an alternative solution to avoid transfer pricing disputes in Indonesia," said Wahyu Nuryanto, head of transfer pricing at MUC Consulting. "We expect that Indonesia will be more in line with international rules and will be promoting better transfer pricing environment with more certainty for the taxpayers," he added.
(As of January 1 2016)
|Corporate income tax rate||25% (a)|
|Capital gains tax rate||n.a.|
|Royalties from patents, know-how, etc.||15/20% (b)|
|Land or buildings||10% (c)|
|Other payments for the use of assets||2% (d)|
|Fees for services|
|Payments to residents|
|Technical, management and consultant services||2% (d)|
|Construction contracting services||2/3/4% (e)|
|Construction planning and supervision||4/6% (e)|
|Other services||2% (d)|
|Payments to non-residents||20% (f)|
|Branch profits tax||20% (g)|
Net operating losses (years)
|Carryforward||5 to 10 (h)|
Source: EY 2016 Worldwide Corporate Tax Guide