Reduce Financial Risk Through Transfer Pricing Services in Indonesia
In the business industry, transactions between companies can be a tad bit confusing, especially when it comes to transferring pricing. Being a part of a multinational organization, it is vital for you to understand the rules and regulations present in transfer pricing in Indonesia. Not accurately grasping the concept of transfer pricing can land you and your organization financial risks.
What is Transfer Pricing?
Terms and conditions apply to the setting of goods and services price between two companies under the same organization are known as transfer pricing. For example, when a subsidiary company sells to the parent company, the cost paid by the parent company to the subsidiary company is regarded as the transfer price. In other words, it is an intra-corporate transaction.
Why Is It Important to Know About Transfer Pricing?
Some companies try to exploit tax payments on countries that are experiencing fluctuation. If you are found guilty of abusing or manipulating taxes intentionally or unintentionally, you could face a hefty fine which will set back the progress of your business.
The real goal of transfer pricing regulations is to tax at the first place where the value was created. Tax authorities everywhere have tight rules on transfer pricing to avoid transfer mispricing. This means that tax authorities have regulations imposed to attempt to prevent companies from using transfer pricing to avoid taxes. Thus, the necessity to learn and navigate transfer pricing and its proper documents are imperative to your business.
How Do I Go About Transfer Pricing in Indonesia?
In Indonesia, tax authorities are relatively strict and complying to their domestic tax laws is of crucial importance. Therefore, it is noteworthy that the Ministry of Finance of the Republic of Indonesia’s latest transfer pricing is regulation No. 213/PMK.03/2016 or commonly known as the ‘PMK-213’.
Notable changes have been made as to what constitutes as a transfer pricing documentation, who is responsible and when to prepare the documentation. The primary purpose of the law is to strengthen the quality of transfer pricing document while promoting transparency in between tax jurisdictions. The said regulation has been effective from 30th December 2016 and aims to solidify the quality of transfer pricing and to promote transparency within tax jurisdictions too.
The PMK-213 has released a BEPS Action Plan 13 in the nation, implementing a three-levelled transfer pricing documentation approach, which requires:
- Master File; a high-level overview of the multinational’s global operations and value chain.
- Local File; a thorough report of the local entity’s operations and transfer pricing practices.
- Country by Country Report or the ‘CbC Report’; a large range of meticulous details of the value chain and operations of the whole multinational.
How Can I Get Help?
Outsourcing to a leading accounting and taxing company has become the choice of many companies in handling their transfer pricing. 3E Accounting in Indonesia is the best at what it does and has helped to manage taxes for satisfied clients across the globe. Our team of experts range from auditing, accounting, legal and human resource are here to solve your taxation nightmares. Please consult us at 3E Accounting Indonesia and get you taxes sorted swiftly today!