JAKARTA. After the end of tax amnesty program on March 31, 2017, the government will optimize the state revenues by preventing the transfer pricing manipulation.

According to the Director of International Taxation at Directorate General of Taxation (Ministry of Finance) John Hutagaol, the Minister of Finance Regulation No 213/2016 stipulates that affiliated company is subject to include the transfer pricing documents, consist of master file and local file, in 2016 annual notification letter (SPT) no later than April 2017.

Meanwhile the country by country report (CbCR) should be submitted to tax authority no later than the end of December 2017 with respecting to 2016 gross circulations. The CbCR submission is required to a parent company with a more than Rp 11 trillion total returns.

This requirement applies on all foreign investment companies, which are the subsidiaries of companies abroad. The requirement to submit the CbCR also applies to the parent company of a country, which does not require CbCR submission.

“This also applies on foreign companies that require the CbCR submission, but do not have data exchange with Indonesia,” John said.

To date, some parent companies through their subsidiaries in different countries have manipulated the different taxation systems for certain purposes.

Vice Minister of Finance Mardiasmo said that some countries have suffered losses of this action, since the manipulation has eroded the corporate income tax base. In fact, 20%-30% of the revenues of some countries are derived from the multinational companies’ activities.

According to Mardiasmo, the manipulation has brought significant impact to developing countries, including Indonesia. Therefore, this policy can be an alternative after the accomplishment of tax amnesty program.

Lack of Firm Sanction

Head of Sub Directorate of International Taxation Dispute Prevention and Resolution at Directorate General of Taxation Achmad Amin said that a taxpayer will be considered fail to complete the annual notification letter (SPT) if fails to complete those three transfer pricing documents.

As information, a taxpayer only needs to submit a summary or a letter of explaining the availability of transfer pricing documents from the local file and master file. In this case, the taxpayer only needs to show the CbCR and the real documents of local file and master file to tax authority when it is required. The SPT will be considered ‘incomplete’ if the taxpayer fails to show the required documents.

Nevertheless, Secretary General of Tax Compartment of Indonesian Accountants Association Adi Saputra said that the transfer pricing regulation lacks the sanctions. “In other countries, fail to create transfer pricing documents may be fined US$ 1.000. In Japan, the fine is about 300,000 yen,” he said.

In Indonesia, fail to make the summary of local file and master file will only be considered as late SPT submission with a minimum fine. (Muhammad Farid/Translator)

 

Editor: Sanny Cicilia