Transfer Pricing Documentation Indonesia
Complete guide to transfer pricing requirements for PT PMA companies with related party transactions. Learn about documentation thresholds, master file, local file, and compliance obligations.
Get TP AssistanceKey Requirements
When is TP Documentation Required?
Meet any ONE of these thresholds and Master File + Local File is mandatory
Gross Revenue
Master File & Local File Required
Related Party Transactions
Master File & Local File Required
Intangible Transactions
Master File & Local File Required
With Tax Haven
Master File & Local File Required
Documentation Requirements
What must be included in your transfer pricing documentation
Master File
Global MNE Group Overview
- Organizational structure and ownership
- Description of MNE group business
- MNE group intangibles strategy
- Intercompany financial activities
- MNE group financial and tax positions
- Consolidated financial statements
- List of existing unilateral APAs and rulings
Local File
Indonesian Entity Details
- Local entity management structure
- Detailed business description
- Related party transaction details
- Functional analysis
- Comparability analysis
- Selection of transfer pricing method
- Application of method and documentation
- Financial information and allocation keys
Transfer Pricing Methods
Accepted methods for determining arm's length pricing in Indonesia
Comparable Uncontrolled Price (CUP)
Compares price charged in controlled transaction to price in comparable uncontrolled transaction
Best for: Commodity transactions, identical productsResale Price Method (RPM)
Based on resale price to independent party minus appropriate gross margin
Best for: Distribution activities with limited value-addCost Plus Method (CPM)
Cost incurred plus appropriate markup based on functions performed
Best for: Manufacturing, service providersTransactional Net Margin Method (TNMM)
Examines net profit margin relative to appropriate base (costs, sales, assets)
Best for: Complex transactions, limited comparablesProfit Split Method (PSM)
Allocates combined profits based on relative contributions
Best for: Highly integrated operations, unique intangiblesWho is a Related Party?
Understanding related party relationships under Indonesian tax law
| Relationship Type | Definition | Example |
|---|---|---|
| Direct Ownership | 25% or more ownership interest | Parent company owning 51% of subsidiary |
| Indirect Ownership | Control through intermediate entities | Grandparent company through subsidiary |
| Common Control | Same parties control both entities | Sister companies with same shareholders |
| Management Control | Control through management or technology | Franchise or license arrangements |
| Debt Dependency | 50%+ of capital from related party loans | Intercompany financing arrangements |
Compliance Timeline
Key deadlines for transfer pricing compliance
Complete all related party transactions documentation
Maintain contemporaneous records
TP Documentation must be available
Master File and Local File ready
Submit TP Form (Attachment 3A)
Summary of related party transactions
Provide full TP Documentation to DGT
Within 1 month of request
Penalties for Non-Compliance
Failure to comply with transfer pricing requirements can result in significant penalties
| Violation | Penalty | Notes |
|---|---|---|
| No TP Documentation | IDR 1,000,000 per document | Per missing master/local file |
| Late Documentation | Same as no documentation | Must be available within 4 months |
| Insufficient Documentation | Tax adjustment + 2%/month interest | If DGT makes TP adjustment |
| Fraudulent Reporting | Up to 4x underpaid tax | Plus potential criminal prosecution |
Related Tax Guides
Other relevant tax information for PT PMA
Frequently Asked Questions
Common questions about transfer pricing in Indonesia
What is transfer pricing in Indonesia?
Transfer pricing refers to the pricing of transactions between related parties. In Indonesia, companies must ensure that related party transactions are conducted at arm's length prices - meaning prices that would be charged between independent parties in comparable circumstances.
When is TP documentation required in Indonesia?
TP documentation (Master File and Local File) is required if your company has: gross revenue exceeding IDR 50 billion, OR related party transactions exceeding IDR 20 billion, OR related party transactions involving intangibles exceeding IDR 5 billion, OR any transactions with parties in tax haven jurisdictions.
What is the arm's length principle?
The arm's length principle requires that transactions between related parties be priced as if they were between independent parties under comparable circumstances. This is the international standard for transfer pricing used in Indonesia and most countries worldwide.
What happens if my company doesn't have TP documentation?
Failure to maintain TP documentation can result in penalties of IDR 1,000,000 per missing document. More significantly, the tax authority (DGT) can make transfer pricing adjustments and assess additional taxes with 2% monthly interest penalties.
What is the difference between Master File and Local File?
The Master File provides a high-level overview of the multinational group's global business, including organizational structure, intangibles, and financial arrangements. The Local File contains detailed information about specific related party transactions of the Indonesian entity.
How long must TP documentation be retained?
Transfer pricing documentation must be retained for at least 10 years from the end of the tax year to which it relates. Documentation must be available in Indonesian language within 1 month of a request from the tax authority.
Need Transfer Pricing Support?
Our transfer pricing specialists can prepare your Master File and Local File, conduct benchmarking studies, and ensure full compliance with Indonesian regulations.
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