Referring to recent tax regulation of Minister of Finance No. PMK-213/PMK.03/2016 regarding type of document and/or additional information which is compulsory to be maintained by the taxpayer that has transaction with related party and procedures of the management of Transfer Pricing Documentation (“PMK-213â€).
Referring to Article 2 of PMK 213 (qualification of taxpayer to perform Transfer Pricing documentation in according to PMK 213) :
(1) Transfer Pricing Documents shall consist of the following:
a. master documents;
b. local documents; and/or
c. country by country reports (CBCR).
The master file and the local file and CBCR should be prepared in Bahasa Indonesia.
(2) A Taxpayer conducting an Affiliated Transaction with:
a. the value of gross income in the previous Tax Year in one Tax Year of more than Rp50,000,000,000.00 (fifty billion rupiah);
b. the value of Affiliated Transaction in the previous Tax Year in one Tax Year:
1. of more than Rp20,000,000,000.00 (twenty billion rupiah) for
tangible goods transaction; or
2. of more than Rp5,000,000,000.00 (five billion rupiah) for each
service provision, interest payment, intangible goods utilization, or
other Affiliated Transactions; or
c. An Affiliated Party in a country or jurisdiction with the rate of Income Tax lower than the rate of Income Tax as referred to in Article 17 of Law Number 7 Year 1983 regarding Income Tax as amended for several times with the most recent amendment by Law Number 36 Year 2008 regarding the Fourth Amendment to Law Number 7 Year 1983 regarding Income Tax, shall be obligated to prepare and retain the Transfer Pricing Documents as referred to in paragraph (1) sub-paragraph a and sub-paragraph b as a part of the obligation to retain other documents as referred to in the provisions of laws and regulations in the taxation sector.
(3) A Taxpayer constituting a Parent Entity of a Business Group having consolidated gross income in the Tax Year concerned not less than Rp11,000,000,000,000.00 (eleven trillion rupiah), shall be obligated to prepare and retain the Transfer Pricing Documents as referred to in paragraph (1) sub-paragraph a, sub-paragraph b, and sub-paragraph c as a part of the obligation to retain other documents as referred to in the provisions of laws and regulations in the taxation sector.
(4) In the event that a domestic Taxpayer has the position of member of a Business Group and the parent entity of the Business Group is a foreign tax subject, the domestic Taxpayer shall be obligated to deliver the country by country reports as referred to in paragraph (1) sub-paragraph c insofar as the country or jurisdiction in which the Parent Entity is domiciled:
a. does not obligate the delivery of country by country reports;
b. does not have any agreement with the government of Indonesia on the exchange of taxation information; or
c. has an agreement with the government of Indonesia on the exchange of taxation information, but the country by country reports cannot be obtained by the government of Indonesia from such country or
jurisdiction.
FACT PT Zavia:
Referring to Art. 2 of PMK 213, we understand that PT Zavia (“PT Zaviaâ€) meet the requirements (i.e. having receivable and payable with xxxx, xxxx, xxxx -overseas entities whose corporate tax rate at overseas is lower than Indonesia corporate tax rate i.e. 25%) to conduct and maintain master file (“dokumen indukâ€) and local file (“dokumen lokalâ€) for Fiscal Year (“FYâ€) 2016 (January up to December) as part of other documents of bookkeeping referring to Indonesian prevailing tax law.
The master file and the local file should be maintained based on data and information at the time when the transactions were done and should be conducted based on data and information available up to the end of fiscal year (2016). The absence of the requirement of using data and information when the transactions were done may result in the taxpayer is considered does not apply arms-length principle. The tax office may examine the arms-length principle officially and the underpayment tax assessment letter is subject to interest sanction of 2% per month at the maximum of 24 months.
Deadline:
- The master file and the local file should be available at the latest by 4 (four) months after the end of fiscal year which means 30 April 2017 for PT RTI.
- The taxpayer that is parent entity of the business group having total consolidated gross income of IDR 11 trillion at the minimum, the taxpayer should conduct and maintain country by country report and this document should be available at the latest by 12 months after the end of fiscal the year (December 2017).
In the event of Indonesian taxpayer as member of business group and the parent entity is a foreign taxpayer, the Indonesian taxpayer should submit country by country report as long as country or jurisdiction where the parent entity is domiciled : does not require submission of country by country report, does not have agreement with Government of Indonesia regarding exchange of tax information or having agreement with Government of Indonesia for exchange of tax information, however, the country by country report can not be obtained by Government of Indonesia from the mentioned country or jurisdiction.
Penalty:
The Tax Office may ask for the master file and local file if necessary among others for supervisory of taxpayer’s compliance, tax audit, initial tax audit and investigation. For example : for the supervisory of taxpayer’s compliance purposes, the taxpayer should response to the request at the latest by 14 (fourteen) days of the date delivery of the tax office’s letter by post or courier service or the date of receipt by the taxpayer (if directly delivered by the tax office).
1) If requested, the taxpayer should submit the master file and the local file during the time referring to prevailing tax law and regulations and in the event of the submission exceeds the time limit, the master file and the local file are not considered as master file and local file. The tax office may examine the arms-length principle officially. The underpayment tax assessment letter is subject to interest sanction of 2% per month at the maximum of 24 months.
2) In the event of the taxpayer does not submit the master file and the local file, the taxpayer is considered not meet the obligation to conduct and maintain the master file and the local file. The underpayment tax assessment letter is subject to sanction of 50% increasing.
Submission of summary Master file and Local File.
The taxpayer should submit attachment of summary of master file and local file (“ikhtisarâ€) in its annual corporate income tax return (see the attachments). The ikhtisar stated among others the date of availability of the master file and the local file. If the taxpayer that does not submit the ikhtisar, the annual corporate income tax return is considered as incomplete and therefore the tax return is considered not to be submitted to the tax office. If the tax office has submitted the warning letter and the taxpayer still not submitted the ikhtisar, the tax office will conduct the tax audit. The underpayment tax assessment letter is subject to sanction of increasing of 50%.
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Regards
