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With transactions between businesses that nowadays know no boundaries, it is undeniable that they have also become more complicated than ever. In line with the inter-company transactions that show no sign of stopping, tax authorities in many countries around the world are implementing hard-and-fast regulations in order to protect their own tax revenues, and Indonesia is no exception.
Particularly in Indonesia, the tax authorities want to ensure that all cross-border business transactions are in compliance with the arm’s length principle that has been acknowledged worldwide and of course, with domestic tax rules.
Understanding all the rules and regulations related to transfer pricing may be challenging and discouraging to pursue in that there are a lot to keep up with. As such, it requires not only specific time investment, but also energy and human resources.
Ensure Transfer Pricing Compliance in Indonesia
In accordance with PMK-2132016, all domestic and international affiliated business transactions are obliged to submit documentation, which is known as TP Doc. All taxpayers in Indonesia must maintain the 3-tier documentation that consists of Master File, Local File and Country-by-Country Report when performing business transactions that meet any of the criteria set out by the government. Furthermore, all the reports have to be submitted in Bahasa Indonesia.
If companies are not able to submit the required documentation in a timely manner (within four months after fiscal year end) and fail to comply with transfer pricing policies and standards in Indonesia, tax liabilities and penalties in hefty amount will incur. Moreover, companies may also have to deal with pricey transfer pricing audits.
The ideal solution to ascertain transfer pricing compliance while running a business and perform numerous business transactions in Indonesia is to engage a professional transfer pricing service provider. At Cekindo, we offer both transfer pricing compliance and transfer pricing advisory services, so that you would not have to worry about whether your business transactions satisfy the compulsory local requirements and comply with international transfer pricing standards.