Transfer Pricing
Transfer Pricing is the determination of prices in transactions between related parties (affiliates). In Indonesia, it is governed by Article 18 of the Income Tax Law and PMK No. 172/PMK.03/2023. The DJP may adjust transfer prices that do not meet the arm's length principle (Prinsip Kewajaran dan Kelaziman Usaha / PKKU). Taxpayers transacting with affiliates must prepare Transfer Pricing Documentation (TP Doc) comprising a Master File, Local File, and Country-by-Country Report (CbCR) if certain thresholds are met.
This article is for education, not tax advice.
Example
PT Induk sells raw materials to its Singapore subsidiary at Rp 1,000/unit, while the market price is Rp 1,500/unit. The DJP may correct the price to Rp 1,500/unit, increasing PT Induk's taxable income by Rp 500/unit.
Source: Article 18 UU PPh No. 36/2008; PMK No. 172/PMK.03/2023
Related terms