TP Doc as the Starting Point  of ALP Testimony

TP Doc as the Starting Point of ALP Testimony

KUP - 13 Mar, 2023 11:03 WIB

Ideatax, Jakarta -- According to the 2021 Mutual Agreement Procedure (MAP) Statistic, Organization for Economic Co-operation or OECD (2022) reported that since 2016, there has been an increase in the number of MAP related to transfer pricing (TP). In 2016, the number of MAP cases related to TP was 1200 cases in aggregate, whereas in 2020, the number increased to more than 2,200 cases. However, in 2021, the number of MAP cases related to transfer pricing decrease to a level below 2,200 cases.


For your information, according to Regulation of the Ministry of Finance or Peraturan Menteri Keuangan (PMK) Number 22-/PMK.03/2020, MAP or Joint Approval procedures are administrative procedures that are performed to resolve issues arising in the application of tax treaties. Meanwhile, transfer pricing is defined as the price in a transaction that is affected by a particular relationship. In other words, it can be interpreted as a method of determining the sale/ purchase price of a transaction between parties that are related/ affiliated. The details of the MAP case related to transfer pricing can be seen from the chart below:

Source: OECD (2022)


Transfer pricing can appear haunting in taxation; it is because transfer prices that occur between related parties are suspected to be unreasonable. In addition, transfer pricing is also suspected as a corporate scheme to transfer profits to tax authorities that have lower tax rates.


Therefore, to prove that the price incurred between affiliated companies complies with the arm-length principle (ALP), companies conducting affiliated transactions are required to prepare transfer pricing documentation (TP Doc). Through an apt TP doc, taxpayers can prove that the applicable transfer price between related/ affiliated parties meets the principle of fairness.


This provision is regulated in Regulation of the Ministry of Finance Number 213 of 2016 concerning Types of Documents and/ or Additional Information that must be Submitted by Taxpayers Transacting with Related Parties.


The provision stipulates that taxpayers transacting with related parties are required to organize and store TP docs. There are three types of TP docs: master documents, local file and country-by-country reports (CbCR).


Master files and local file must be prepared by taxpayers who perform affiliated transactions with a gross circulation value of the previous year exceeding IDR 50 billion. Affiliated transactions of more than IDR 20 billion for tangible goods or affiliated transactions of more than IDR 5 billion for intangible transactions, such as the provision of services, interest payments, utilization of intangible Taxable Goods or other affiliated transactions.


In addition, parties who are also required to prepare Master files and local file are parties that perform affiliated transactions with countries or jurisdictions with lower income tax rates than those applicable in Indonesia, as illustrated in the following chart:


Meanwhile, taxpayers who act as the parent of a business group that has a consolidated gross turnover of more than IDR 11 trillion are required to prepare a Masterfile and local file, besides being required to make a CbCR.


The obligation to make a CbCR also applies to taxpayers who act as members of a business group who are foreign tax subjects, as long as the jurisdiction where the parent company is located does not require a CbCR, does not have an agreement with the Indonesian government regarding the exchange of tax information, or has an agreement with the Indonesian government regarding exchange of information but CbCR could not be obtained.


In terms of content, the Masterfile document contains at least information regarding the ownership structure and chart as well as the country or jurisdiction of each member, the performed business activities, the owned intangible assets, financial and financing activities as well as consolidated financial statements of the parent entity and tax information related to affiliated transactions.


Local file documents contain at least information regarding identities and performed business activities, information on performed affiliated and independent transactions, implementation of the arms-length principle, financial information and information regarding events that affect the formation of prices/ profit levels.


Moreover, according to the Regulation of the Ministry of Finance or PMK-213 of 2016, the CbCR document contains at least information regarding income allocation, paid taxes, business activities per country which includes country name, business circulation, profit/ loss before taxes, income taxes that have been deducted/ collected/ paid, payable income tax, as well as a list of business group members and business activities by country.


Regarding the reporting due dates, Masterfile and local file must be available no later than four months after the end of the tax year. Meanwhile, CbCR must be available no later than twelve months after the end of the tax year. If the TP doc is not submitted, the Taxpayer is deemed not to have fulfilled the obligation to organize and store the transfer pricing determination documents.


Therefore, to avoid delays in submitting TP doc, which can result in failure to fulfill the obligation to submit transfer pricing documents, taxpayers can contact Ideatax for further consultation.



OECD. (2022). Mutual Agreement Procedure Statistics 2021 - Inventory trends. Retrieved from

OECD. (2022). 2021 Mutual Agreement Procedures Statistic. Retrieved from


Related provisions

  • PMK-213/PMK.03/2016 concerning Types of Documents and or Additional Information that Must Be Submitted by Taxpayers Conducting Transactions with Parties with Special Relationships
  • PMK-22/PMK.03/2020 concerning Procedures for Implementing Transfer Price Agreements (Advance Pricing Agreement)

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