What currency do you prefer?

PSAK 10 – The Effects of Changes in Foreign Exchange Rates should be effectively applied for financial statements whose annual periods begin on or after 1 January 2012. There are some changes and amendment in this new standard. This article will be focus on one interesting issue of this new standard, Presentation Currency.

The new standard provides guidelines of the hierarchy factors to determine the functional currency of the entity and also providemethod how to translate financial statements into a presentation. The most significant change of this new standard is that an entity may present its financial statements in any currency (s). It means that the presentation currency may differ from the entity’s functional currency.  For illustration, an entity in Indonesia can present its financial statements in Euro currency, even if the currency of the primary economic environment in which the entity operates is Indonesian Rupiah and a company only has few transactions and insignificant Euro transactions on its operation.

When the presentation currency differs from the entity’s functional currency, it translates its results and financial position into the presentation currency. The standard gives us the procedures to translate the financial position when the presentation currency differs from the functional currency. This rule accommodates an entity whose parent company or foreign operation division is using other currency than the entity’s functional currency. It also facilitates the entity during the consolidation purpose.

Rupiah and US Dollar

However, in doing a business, an entity in Indonesia is also bounded with other rules and regulations. There are many rules and regulations that should be complied by every company in Indonesia. Regarding this currency issue, besides the accounting principles, at least there are three other regulations which stipulate rules related currency, especially the presentation currency.

First, based Law No.8/1997 on “Company’s Documents”, in Article 8 it is stated that each company must make the records of financial statements in accordance with company requirements, ​​using the Latin alphabet, Arabic numerals, the currency of the Indonesian Rupiah, and arranged in the Indonesian language. In the event that there is consent from the Minister of Finance, the records referred can be arranged in a foreign language. The Indonesian Law No.28/2007 on third amendment to Law No.6/1983 on “Tax general rules and procedures”, Article 3 point 1 states that each  Taxpayer must fill out the Notice correctly, completely, and clearly, in the Indonesian language using Latin letters, Arabic numerals and the currency of Indonesian Rupiah. However, for companies having consent from the Minister of Finance, it may use other currency and other language for its financial statements. Thus, by the consent from the Minister of Finance as regulated by these Laws,  for those who want to use other currency and language than Indonesian are given a way out. Moreover, this option is regulated in the Minister of Finance’s Regulation (PMK) No. 196/1997 on “Procedures for the Implementation of Bookkeeping with Foreign Languages and Foreign Currency Unit and Tax Notice Submission Obligation of Annual Income Tax”. In Article 2, it is stated that a Taxpayer can maintain bookkeeping with the use of foreign languages ​​and the currency unit other than Indonesian Rupiah by using English and U.S. Dollar currency.

Those regulations create a border for the implementation of PSAK 10, especially for the presentation currency issue.  From the accounting side, an entity will be free to choose in whatever currency its financial statement will be presented. But, from the other sides, an entity can only present its financial statements by using Indonesian Rupiah currency or U.S. Dollar currency (if has the consent), moreover, the language used option are Bahasa Indonesia or English.

Public listed company and Public Company

Badan Pengawas Pasar Modal (The Capital Market Supervisory Agency) or Bapepam regulates some rules and regulation that should be complied by all Public listed companies and Public companies in Indonesia. Bapepam rule No: VIII.G.7 from Bapepam gives us the Guidelines for Financial Statements Presentation. Based on the Bapepam’s Regulation No: VIII.G.7, section 2 – Particular, point (c) Presentation Currency: Presentation currency used by Public Listed Company and Public Company in Indonesia is Indonesian Rupiah. These companies may use other currency as its presentation currency, only if the currency meets the criteria of functional currency. The consolidated financial statements are presented in functional currency, after considering the functional currency indicators on the parent company and subsidiaries. Moreover, the PSAK 10 explains the criteria and factors in determining functional currency. In Section 2 – Particular, Point (b) in Bapepam rule No: VIII.G.7 states that financial statements should be presented in Bahasa Indonesia, but if it is presented in another language, the information should be the same if it is in Bahasa Indonesia.

In other words, the Bapepam rule above accommodates a entity’s need as long as the presentation currency is the same with the functional currency. Therefore, it could not be in Indonesian Rupiah or US Dollar only. Furthermore, for use of language, as long as a entity has the permit, the entity may use any language as its presentation language of financial statements.

How to use the other currencies and languages?

Since a entity should comply with every rule and regulation that binds, it should consider all possibilities to ensure that the policies and operations accommodates its needs and requirement. For companies whose presentation currency is expected in US Dollar and its financial statements language is in English, they can apply the consent from the Minister of Finance, as stipulated in the Minister of Finance’s Regulation (PMK) No. 196/1997. For companies whose presentation currency is expected in other than Indonesian Rupiah and US Dollar and its financial statements language is in Bahasa Indonesia or English, the best solution is to perform dual language and dual currency on their bookkeeping and the financial reporting. The good news is that, PSAK 10 gives us the guidelines for using a presentation currency other than the functional currency (translation to the presentation currency).

Tax Audit Trend for Year 2012 Director General of Taxes Number SE – 07/PJ/2012

Tax Audit Trend for Year 2012 Director General of Taxes Number SE – 07/PJ/2012

As one of the law enforcement mechanism on the self assessment system, DGT is mandated to manage the source of fund from tax sector. For year 2012, the national tax revenue is targeted to reach up to IDR 13,300,000,000,000 (thirteen trillion and three hundred billion rupiah), compared to the target in previous year which is only up to IDR 9 trillion. To achieve the target, DGT is supported by a comprehensive series of tax plan and strategy, including tax audits.

As  one of the functions of law enforcement upon the self assessment system, tax audits activities shall be well-planned, professional, complying with the prevailing regulations, based on certain focus and strategy, and creating a deterrent effect.According to Circular of Director General of Taxes No. SE – 07/PJ/2012, the tax audit for year 2012 are divided into two groups, namely tax audits for evaluating the tax compliance, and tax audit for other purposes related to the implementation of the tax regulations.

Tax Audit for Tax Compliance Evaluation

It deals with tax returns of taxpayers who meet the criteria of routine and special tax audits. The completion of the tax audit process will be indicated with the issuance of a tax assessment notice or SKP (Tax Underpayment Assessment Notice/SKPKB, Additional Tax Underpayment Assessment Notice /SKPKBT, Nil Tax Assessment Notice/SKPN, Tax Overpayment Assessment Notice/SKPLB) and Tax Collection Letter /STP). This type of tax audit  has been considered as the backbone of the State tax revenue for year to year.

Target of Tax Audit

Speaking of tax audit completion, the DGT has set out the priority scale on hundreds of tax audit cases which is structured below:

  1. Regular Audit on Refund of Overpayment Tax Return and its expansion having a compensation effect;
  2. Regular Audit on Compensation of Overpayment Tax Return whose assessment notice issuance period is going to elapse;
  3. Special Audit having potential significant revenue;
  4. Regular Audit related to Individual Taxpayers leaving Indonesia for good;
  5. Regular Audit related to Corporate Taxpayers conducting merger, business coalition, business expansion, business spin off, and liquidation/business dissolution; and
  6. Regular Audit upon Annual Income Tax Returns stating loss with no overpayment having potential significant revenue, with the following conditions:
    1. Having significant transactions with affiliated parties;
    2. Having a compensation effect in the following tax years; or
    3. Having loss for 3 (three) respective years or more.

For corporate taxpayers, these are sectors as the main target of the 2012 tax audit:



Business Sector


01134; 15141 Palm oil


10101; 111**;    112** Mining


22120; 64290; 92132 Mass Media


24*** Chemical Industry


26***; 27*** Processing Industry


341**; 501**; 502**; 503**; 504** Automotive


45*** Construction


51*** Large Trading (including indenture importer)


65***; 66*** Bank and Insurance


701** Real Estate


741** Consultation Service

For individual taxpayers, professionals (tax consultants, lawyer/advocates, and notaries) are still the focus of tax audit as the previous year. The list of individual taxpayer target also includes any individuals having relation with corporate taxpayers under after tax audits.

In addition to the above corporate and individual targets, the national scope target of the 2012 Tax Audit are also the following:

  1. Taxpayers having received initial returns on tax overpayment as mentioned in Article 17C of the General Provision and Tax Procedures Law (KUP Law); or
  2. Low risk VAT Registered Person having received initial returns upon tax overpayment as mentioned in Article 9 paragraph (4c) of the VAT and Sales Tax on Luxury Goods Law (VAT Law).

Special Tax Audit

The provision of special audit, among others, requires Tax Auditor Units (UP2) in Large Tax Offices, Special Tax Offices, and Medium (Madya) Tax Offices, to submit a minimum of five proposals of Special Tax Audit related to transfer pricing transactions. From the proposals submitted, each UP2 shall conduct the tax audits with the following requirements:

  1. At least 3 (three) Special Audits for UP2 in Large Tax Offices and Special Tax Offices; and
  2. At least 1 (one) Special Audit for Medium Tax Offices.

For any corrections to tax objects in relation with transfer pricing transactions of IDR 50,000,000,000.00 (fifty billion rupiah) or more, the Transfer Pricing Audit Quality Control Team shall be engaged as stipulated in the Decision of Director General of Taxes Number KEP-120/PJ/2011 and its amendment.

Particularly for taxpayers engaging in export and/or import of goods and/or service, DGT shall jointly with the Director General of Customs and Duty to conducts the tax audits.

Tax Audit for Other Purpose in order to fulfill the Provision of Tax Regulation

This kind of tax audit carries out the regulatory function of DGT, where it is conducted to implement certain provisions in the tax regulations. The most distinctive characteristic is that it is not intended for issuance of Tax Assessment Notice or Tax Collection Letter. For year 2012, the strategy for such audit is, among others, as follows:

  1. It is performed by Functional Tax Auditors.
  2. If required, the Head of UP2 can further establish a special task force (Satgas Pemeriksaan Tujuan Lain)
  3. The completion priority are for:
  • Cases with time limits as determined in Audit Instruction Letters;
  • Cases of issuance/revocation of Taxpayer ID, and registration/annulment as VAT Registered Person; and
  • Cases related to certain purposes other than mentioned in letter a and b.

New Financial Accounting Standards

New Financial Accounting Standards

Previously, during 2008-2010, many new Exposure Draft of PSAK already made and officially released shall be effectively applied on 1 January 2011, while the rest should be on 1 January 2012. This issue has been actually covered in our Tax Minimagz previous edition. To catch up with all the revisions of the PSAK Draft thorough 2008 till the current days, this edition will bring you the update.

The following are some revised financial accounting standards which are relevant to the common company in Indonesia:

PSAK 1 – Presentation of Financial Statements

The Presentation of Financial Statement standard is applied to all entities, including profit-oriented and non-profit entities, excluding Shari’a entity. It provides overall requirements for the presentation of financial statements, guidance on their structure, and the minimum requirements for their content. It ensures the comparability both the entity’s financial statements of previous periods and the other entities’ financial statements.

PSAK 2 – Cash Flow Statement

The purpose of cash flow statement is to provide information on the operating cash receipts and cash payments of an entity during a period, as well as to provide insight into its various investing and financing activities.  It is a vitally important financial statement since the ultimate concern of investors is the reporting entity’s ability to generate cash flows which will support payments (typically but not necessarily in the form of dividends) to the shareholders.

PSAK 4 – Consolidated Financial Statements

The standard is applied in preparing the consolidated financial statements of groups of companies controlled by a parent entity. All subsidiaries of the parent company should be consolidated. Control is supposed to occur when the parent company owns either directly or indirectly more than half of the voting rights of the entity.

PSAK 7 – Affiliated Party Disclosure

This standard is applied to entities in identification of; (1) their special relationships and affiliated transactions; (2) outstanding balances, including commitments between the entities and their affiliated parties, and determination of the disclosures which are made concerning the items.

PSAK 10 – Effects of Changes in Foreign Exchange Rates 

The purpose of this standard is to set out the way to record account for transactions in foreign currencies and foreign operation. The standard also provides guidelines to determine the functional currency. The key issues are the exchange rate(s) that should be used and where the effects of changes in exchange rates are reported in financial statements.

PSAK 12 – Interests in Joint Ventures

The standard is applied to accounting of interests in joint ventures and the financial reporting of assets, liabilities, income, and expenses of the joint ventures in the account of the venturers. The definition of joint venture refers to a contractual agreement between two or more parties that undertake an economic activity subject to joint control.

PSAK 15 – Investments in Associates

The standard is applied to all accounting for investment in associates, except for investment in associates held by a venture capital organization, a mutual fund, a unit trust, and a similar entity, including investment-linked insurance funds, where these investments upon initial recognition are designated at fair value through profit or loss or classified as held for trading and accounted for in accordance with PSAK 50&55.  The associates are an entity in which an investor has significant influences (20% or more ownership) but neither subsidiary nor an interest in a joint venture.

PSAK 19 – Intangible Assets

The purpose of the standard is to prescribe the recognition and measurement criteria for intangible assets not covered by other standards. The standard will enable users of financial statements to understand the extent of an entity’s investment in such assets and the movements.  The principal issues involved relate to the nature and recognition of intangible assets, determination of costs, and

PSAK 23 – Revenue

The standard prescribes the requirements for the recognition of revenue in an entity’s financial statements. Revenue can take various forms, such as sales of goods, provision of services, royalty fees, franchise fees, management fees, dividends, interest, subscriptions, and so on.  The requirements of this standard are to be applied to accounting for revenue arising from sale of goods, provision of services, and utilization of the entity’s assets  by other party (ies) which can arise a royalty, interest or dividend.

PSAK 24 – Employee Benefits

The standard sets out the accounting and disclosure by employers for employee benefits.  The standard is applied to all employee benefits including short-term employee benefits such as wages, salaries, vocational holiday benefit, sick pay, profit sharing or bonus plans paid within 12 months of the end of the period, and non cash benefits, such as medical care and so on. The standard is also for postemployment benefits, such as pensions, postemployment medical benefits, and postemployment life insurance, and other benefits.

PSAK 25 – Accounting Policies, Changes in Accounting Estimates and Errors

The standard prescribes criteria for selecting and changing accounting policies and the disclosures thereof and also sets out the requirements and disclosures for changes in accounting estimates and corrections to errors. There is always a possibility for errors and changes in accounting estimates.

PSAK 46 – Income Tax

The standard is applied to all Income taxes related with companies’ activities. It provides guidelines on accounting treatment related to Income tax. The main issues of this standard are differences between the accounting and tax consequences of revenue and expenses.

PSAK 48 – Impairment of Assets      

The purpose of this standard is to ensure that assets are carried at no more than their recoverable amount. If an asset’s carrying value exceeds the amount that could be received through use or through selling the asset, then the asset is impaired. An entity shall assess at each balance sheet date whether there is any indication that an asset is impaired. Since an entity should review the impairment indication periodically, and there is always a possibility of impairment existence in the future.

PSAK 50 – Financial Instrument: Presentation

The standard addresses the presentation of financial instruments as financial liabilities or equity. It includes requirements for the presentation of financial instruments as either financial liabilities or equity, including when a financial instrument should be presented as a financial liability or equity instrument by the issuing entity, how to separate and present the components of a compound financial instrument that contains both liability and equity elements, the presentation of interest, dividends, losses and gains related to financial instruments. It complements the requirements for recognizing and measuring financial assets and financial liabilities in PSAK 55, Financial Instruments: Recognition and Measurement, and the disclosure requirements for financial instruments in PSAK 60, Financial Instruments: Disclosures.

PSAK 55 – Financial Instruments: Recognition and Measurement

The standardaddresses the accounting for financial assets and financial liabilities. More specifically, it contains requirements for the condition that: a financial asset or financial liability should firstly be recognized in the balance sheet; a financial asset or a financial liability should be derecognized (i.e., removed from the balance sheet); a financial asset or financial liability should be classified into one of the categories of financial assets or financial liabilities; a financial asset or financial liability should be measured, including; a financial asset or financial liability should be measured at cost, amortized cost, or fair value in the balance sheet; impairment of a financial asset or group of financial assets should be recognized and measured; special accounting rules for hedging relationships involving a financial asset or financial liability should be applied; a gain or loss on a financial asset or financial liability should be recognized either in profit or loss or as a separate component of equity.

PSAK 60 – Financial Instruments: Disclosures

The purpose of the standard is requiring entities to provide disclosures in their financial statements that enable users to evaluate, first, the significance of financial instruments for the entity’s financial position and performance, and, second, the nature and extent of risks arising from financial instruments to which the entity is exposed, and how the entity manages those risks. The disclosure requirements in this standard complement the recognition, measurement, and presentation requirements for financial instruments in PSAK 50, Financial Instruments: Presentation,andPSAK 55, Financial Instruments: Recognition and Measurement.

For Taxpayer, tax planning strategies are ideally made in conformity with any changes created by the IFRS convergence. The related tax-reporting and compliance implication should be identified as the companies begin to assess the potential implications of adopting each new accounting standard. Impacts on the Indonesian taxation from each change of financial statements as a result of IFRS convergence are unavoidable. In addition, with new IFRS-based information, the corporate information systems that support the tax planning, accounting and compliance processes continue to run effectively and efficiently.

Badan/Lembaga Keagamaan Sebagai Penerima Zakat atau Sumbangan Keagamaan Yang Sifatnya Wajib yang Dapat Dikurangkan dari Penghasilan Bruto

Badan/Lembaga Keagamaan Sebagai Penerima Zakat atau Sumbangan Keagamaan Yang Sifatnya Wajib yang Dapat Dikurangkan dari Penghasilan Bruto

PER 15 Tahun 2012 menambah daftar satu lembaga Hindu yg sumbangan kepadanya bisa dibiayakan. Tetapi harus diingat bahwa syarat agar bisa dibiayakan, sumbangan tsb jangan lebih dari 5% dari penghasilan neto fiskal Tahun Pajak sebelumnya (PP-93 Tahun 2010, pasal 3).

Syarat tsb juga berlaku bagi sumbangan lainnya, yaitu :

(1)   Sumbangan dalam rangka penanggulangan bencana nasional, yang merupakan sumbangan untuk korban bencana nasional yang disampaikan secara langsung melalui badan penanggulangan bencana atau disampaikan secara tidak langsung melalui lembaga atau pihak yang telah mendapat izin dari instansi/lembaga yang berwenang untuk pengumpulan dana penanggulangan bencana;

(2)   Sumbangan dalam rangka penelitian dan pengembangan, yang merupakan sumbangan untuk penelitian dan pengembangan yang dilakukan di wilayah Republik Indonesia yang disampaikan melalui lembaga penelitian dan pengembangan;

(3)   Sumbangan fasilitas pendidikan, yang merupakan sumbangan berupa fasilitas pendidikan yang disampaikan melalui lembaga pendidikan;

(4)   Sumbangan dalam rangka pembinaan olahraga, yang merupakan sumbangan untuk membina, mengembangkan dan mengoordinasikan suatu atau gabungan organisasi cabang/jenis olahraga prestasi yang disampaikan melalui lembaga pembinaan olah raga; dan

(5)   Biaya pembangunan infrastruktur sosial merupakan biaya yang dikeluarkan untuk keperluan membangun sarana dan prasarana untuk kepentingan umum dan bersifat nirlaba.

 Hanhan Haeruman

Revision to New Certificate of Domicile

Revision to New Certificate of Domicile

Most withholders of Income Tax Article 26 (ITA 26) consider the standardization of Certificate of Domicile prevailed since the beginning of this year troublesome. Now, while some of them are still trying to comprehend and to get familiar with the standardization, a new regulation is issued to revoke the previous one. What is the change like? Does it give positive  effects to the tax withholders?

As discussed in the article of the year-end Tax Minimagz edition, through the Regulation No. PER-61/PJ./2009 issued in 5 November 2009 (hereinafter referred to PER-61) the Director General of Taxes has eliminated the function of Certificate of Domicile (CoD) issued by a domicile country of a Non Resident Taxpayer. A standardized CoD as stipulated in PER-61/PJ.2009 should be used by any Non Resident  Taxpayers obtaining income from Indonesia who wishes to benefit from the tax treaty implementation. In other words, the provisions of the Tax Treaty can be applicable when the standardized CoD as the administrative requirement is filled in and submitted by the Non Resident Taxpayer to the tax withholder in Indonesia.

The CoD under PER-61 consists of 2 (two) sheets, the first sheet which requires a signature of the tax authority in the Non Resident Taxpayer’s country, and the second sheet which requires a signature of the Non Resident Taxpayer receiving or obtaining income from Indonesia. The first sheet shall prevail for a 12 month period as long as there are no changes made to the name or address of the Non Resident Taxpayer. By contrast, the second sheet should be updated monthly whenever there is any payment of compensation to the Non Resident  Taxpayer.

During the first months of its application, the standardized CoD of the Director General of Taxes has caused a series of difficulties. One of which are related to the process of obtaining the tax  authority’s signature from the Non Resident  Taxpayers’ respective countries. It often takes a quite long time. Even in some countries, the signature request would be simply rejected under a consideration that PER-61 has breached the principle of lex spesialis derogat legi generalis, meaning that special regulation (a tax treaty) is to neglect the general regulation (laws in Indonesia).

As a consequence, delays occur in submitting the standardized CoD by the Non Resident Taxpayers. Ideally, the standardized CoD should be received by the tax withholders in Indonesia prior to the due date of ITA 26 reporting. Thus, in practice many withholders prefer to postpone their ITA 26 reporting.

The postponement is a fair choice since the imposition of 2% administrative sanction due to late reporting is considerably less risky than 20%  withholding tax remittance. This is particularly when the tax treaty clearly limits the tax right only in the hand of the domicile county of the Non Resident Tax or it applies a reduced tax tariff.

To overcome such difficulties–among others as mentioned above- another regulation to amend PER-61 was issued on 30 April 2010 by the Director General of Taxes, Regulation of Director General of Taxes No. PER-24/PJ/2010 (hereinafter refer to as PER 24). The crucial matter brought by PER-24 is that the first sheet of the standardized CoD may be replaced by the domicile country of the Non ResidentTaxpayer.

At glance, the presence of this PER-24 seems to be able to minimize the existing problems, specifically by not ignoring the principle of lex spesialis derogat legi generalis. However, if it is analyzed further, the spirit to overcome the consequences of PER-61 does not fully reflect in its provisions. To be able to function as a substitute of the first sheet of the standardized CoD, PER-24 requires the CoD issued by the domicile country of the Non Resident Taxpayer to fulfill the followings:

  1. Use of  English;
  2. Issuance on 1 January 2010 or afterward;
  3. In form of original document or copylegalized by the tax office where one of the tax withholders/collector is registered;
  4. At least mentioning information of the Non Resident Taxpayer’s name;
  5. Including a signature of an authorized official, or its authorized representative, or authorized tax officer in the contracting country of the tax treaty or to put a sign which is equally treated as signature  commonly accepted in the tax treaty country.

The requirement of CoD in English would not relatively give any trouble to Non Resident Taxpayers coming from the countries where  English is formally used. The case will be different for those coming from countries not using English as their formal language. In this point, it would also force the tax withholders to postpone the tax reporting, when dealing with them. And consequently, this postponement would violate the prevailing  regulation and may result in financial loss to the State Revenue.

Bookmark and Share

Improvement of Technical Procedure for New CoD Use

Improvement of Technical Procedure for New CoD Use

Circular of the Director General of Taxes Number SE-114/PJ/2009 has revised and added provisions concerning CoD (Certificate of Domicile) as stipulated in PER-61/PJ/2009, with the revisions as follows:

1. 1st sheet of DGT- Form I already completed and signed by the Non Resident Taxpayer (WPLN) as well as approved by the authorized official in the Tax Treaty Partner Country may be used more than once within 12 months if:

a) the WPLN makes a transaction with the same tax withholder; and
b)there is no change of name and address of the WPLN.

2. 2nd sheet of DGT-Form I is not necessarily approved by the authorized official, but the WPLN should sign a statement in the below part of the sheet, as well as include a full name and signing date;

3. The 2nd sheet of DGT-Form I is used by the WPLN to declare all income received within 1 (one) tax period. And, in case of several payments made, the WPLN should:

a. state total income for every income group in the similar 2nd sheet of DGT I -Form; and
b. prepare the detail of income received in a month for each income group in separate sheets, which should   cover:

i.   Serial Number;
ii. Receiving date of income;
iii. Type of Income;
iv. Income amount (in original foreign currency);
v. Description (if any).

4. Tax withholder should copy the 2nd sheet of DGTForm I, give an initial and report it at the time of Periodic Tax Return filing, by enclosing a copy of DGT-Form I (1st and 2nd sheets) as previously enclosed in the preceding periodical tax return in the same tax year.

5. Despite the “No” answer for the question point no. 6 Part V of “To be completed if the Income Recipient is Non Individual” in DGT-Form I, the WPLN still may use the Tax Treaty provisions so long as the answers to the question pint no. 7-12 are “Yes”.

6. If the income received by the WPLN is in a foreign currency other than Rupiah, the WPLN may replace IDR amount with the nominal amount of the currency used.

7. Any CoD based on the format and the common practice in the country of the WPLN, it may still be used for tax settlement which is not through tax withholding/collection mechanism in Indonesia.

Bookmark and Share



To provide the taxpayers information as a response to the transfer pricing issues, the Director General of Taxes published the Regulation of Director General of Taxes No. PER-43/PJ./2010 dated 6 September 2010 as guidelines for the taxpayers carrying out affiliated transactions. The following are the pointers of the regulation.

I.    The duty of the taxpayers having the affiliated transaction

  • To apply business arm’s length principle, Except for transactions with value not more than IDR 10 million.

II.   Implementation phases of arm’s length and common business conduct  principles

  • Conducting comparability analysis and determining the comparables;
  • Determining the proper transfer pricing method;
  • Applying the comparability analysis result and the appropriate method in the affiliated transactions;
  • Documenting every stage in determining arm’s length price or profit.

III. Comparable indicator between the affiliated transactions (controlled transactions) and nonaffiliated transaction (uncontrolled transaction).

  • There is no material difference of the condition which affect the price or the profit from the comparable transaction;
  • There is a difference of the condition, but it can be adjusted

IV. Comparable data utilization

  • The taxpayers should prioritize the internal comparable data rather than the external one.

V.   Some factors subject to comparability analysis

  • Characteristics of goods/property transferred  or services characterization;
  • Function of each party involved in the transaction;
  • Terms and conditions in the contract/agreement;
  • Economic condition;
  • Business strategy.

VI.   Arm’s length pricing and profit determination method

  • Comparable Uncontrolled Price method (CUP);
  • Resale Price Method (RPM) or Cost Plus Method (CPM);
  • Profit Split Method (PSM) or Transactional Net Margin Method (TNMM), which are selected based on the hierarchy, starting from CUP method.

VII.   Tax return filling and documentation

  • Documents of affiliated transactions applying arm’s length and common business principles should be maintained for 10 years;
  • Documents at least include:
  • Company profile in details;
  • Pricing/cost allocation policy;
  • Result from analysis of good characteristic, functions, economic condition, contract/agreement, and business strategy.
  • Annual Income Tax Return  reported should inform  affiliated transactions.

VIII.    Director General of Taxes (DGT) Authority

  • To rectify the amount of income and deductions in  affiliated transactions when the arm’s length and common business conduct principles are not applied;
  • To investigate whenever a tax crime act is indicated in affiliated transactions;
  • To employ correlative adjustments after primary adjustments made by DGT in taxpayer’s transaction partner/other country’s authority.

For further information about transfer pricing documentation (TPDoc), please contact:

M Trisna Indra (Marketing Manager), indra(at)mucglobat(dot)com,
Wahyu Nuryanto (Transfer Pricing Manager), wahyu.nuryanto(at)mucglobal(dot)com,
Phone : +62 21 78837111

Bookmark and Share


    Konsultan Pajak, Konsultan Customs, Konsultan IT/E-Govt, Konsultan Riset, Konsultan GCG/Risk, Training, & Kantor Akuntan Publik (KAP)



    MUC Building

    Jl TB Simatupang 15 Jaksel

    Telp +62 21 78837111

    Fax   +62 21 78837666



    Graha Pena Lt 15

    Jl A Yani 88 Surabaya

    Telp +62 31 8202180

    Fax   +62 31 8283884



    Jl Indrakila No 99

    Balikpapan Utara

    Telp +62 542 7202929

    Fax   +62 542 7204298

  • Arsip Artikel

  • Categories

  • Blog Stats

    • 44,003 hits
  • Meta


Get every new post delivered to your Inbox.

Join 801 other followers