Pajak Internasional:

Transfer Pricing

Danny Septriadi, S.E., M.Si., LL.M Int. Tax

B. Bawono Kristiaji, S.E., M.S.E., M.Sc. ADIT
Background
The Most Challenging Areas of Tax, 2013-2014 Praktik profit shifting semakin menjadi sorotan pemerintah
di berbagai negara, tidak terkecuali pemerintah Indonesia

(news.ddtc.co.id, 2 Mar 2017)

45
40
40 Tax Risk, 2011-2012
35
30 27

% Respondents
25
20
15
Ditjen Pajak awasi ketat transaksi afiliasi untuk mendongkrak
penerimaan pajak di 2017 10
5
(news.ddtc.co.id, 6 Jan 2017). 0
Transfer Indirect Other Local tax Others
pricing tax direct tax
2

Feb-20
 Background

Volume and Value of World Exports, 1950-2010

160
 The impact of globalization, financial
140
liberalization, regional cooperation, digital Volume Ekspor Nilai Ekspor

Index, 2005 = 100

economy, etc. 120
100
100

 Today, more than 70% of global trade 80

volume contribute by intrafirm trade. 60

40

20

0
1950 54 58 62 66 70 74 78 82 86 90 94 98 2002 06 10

MNE plays key important role

 A corporation that has its facilities and other assets (resource) in at least one country other than its home country, have
common objective and common control.
 Economic integration  efficiency, synergy, bargaining power, reduce transaction cost, etc.
 MNE thinks globally  reduce cost of business, incl. tax.
3

Feb-20
 What is Transfer Pricing?

Corporate law
Neutral perspective
or pejorative sense?
Transfer Pricing Managerial accounting

Tax

Transfer Pricing refers to the setting of price for transactions between associated enterprise involving the transfer of property or
services…Transfer pricing thus does not necessarily involve tax avoidance, as the need to set such prices is a normal aspect of how MNEs
must operate.
(UN TP Manual)

Transfer of goods/intangibles/services

PT A A Ltd.

Pay money for the transferred goods

4

Feb-20
 What is Transfer Pricing?

PT ABC ABC Co. ABC Enterprise

(Manufacturer) (Distributor) (Console)

I/S Amount I/S Amount I/S Amount

Sales 1000 Sales 1300 Sales 1300

COGS 600 COGS 1000 COGS 600

Gross Profit 400 Gross Profit 300 Gross Profit 700

Operating Expenses 150 Operating Expenses 100 Operating Expenses 250

Operating Profit 250 Operating Profit 200 Operating Profit 450

Other Expenses 50 Other Expenses 50 Other Expenses 100

Profit Before Tax 200 Profit Before Tax 150 Profit Before Tax 350

Tax Expense 50 Tax Expense 22.5 Tax Expense 72.5

Indonesia Mauritius
Tax Rate 25% Tax Rate 15%

Feb-20
 Transfer Price Manipulation

PT ABC ABC Co. ABC Enterprise

(Manufacturer) (Distributor) (Console)

DGT fiscal
adjustment
I/S Amount I/S Amount I/S Amount
Sales 1000 Sales 1300 Sales 1300
COGS 600 COGS 900 COGS 600
Gross Profit 400 Gross Profit 400 Gross Profit 700
Operating Expenses 150 Operating Expenses 100 Operating Expenses 250
Operating Profit 250 Operating Profit 300 Operating Profit 450
Other Expenses 50 Other Expenses 50 Other Expenses 100
Profit Before Tax 200 Profit Before Tax 250 Profit Before Tax 350
Tax Expense 50 Tax Expense 37.5 Tax Expense 87.5

Indonesia Mauritius
Tax Rate 25% Tax Rate 15%
Economic double taxation?
6

Feb-20
Transfer Price Manipulation

 Concerned about tax base erosion or Loss of tax

revenue
 Do the taxpayer act in manipulation of transfer price?
 Whether the taxpayer do avoidance in their taxation?

Tax Authorities

The shifting of taxable income from a company, belonging to an MNE, located in high taxing jurisdiction to a
company belonging to the same group in a law taxing jurisdiction through incorrect transfer price in order
to reduce the overall tax burden of groups (pejorative sense)

“Base Erosion and Profit Shifting Project“(2013-2015)

Feb-20
 Basic Framework from International Tax
Perspective
Art. 9 OECD MTC contain a very important rule, the goal of which is to :

 Avoid economic double taxation

 Avoid tax avoidance
 Limitation of the domestic adjustment rule

Structure:
Art 9 OECD MTC

Associated Arm’s Length Adjustment Rule

Enterprise Principle

Feb-20
 Basic Framework from Domestic Tax Perspective

UU Pajak Penghasilan Pasal 18 ayat (3)

Direktur Jenderal Pajak berwenang untuk menentukan kembali besarnya penghasilan dan
pengurangan serta menentukan utang sebagai modal untuk menghitung besarnya Penghasilan Kena
Pajak:
 Wajib Pajak yang mempunyai hubungan istimewa dengan Wajib Pajak lainnya (Associated
Enterprises);
 Sesuai dengan kewajaran dan kelaziman usaha yang tidak dipengaruhi oleh hubungan istimewa
(Arm’s Length Principle);

Penjelasan UU PPh 18(3): Maksud diadakannya ketentuan ini adalah untuk mencegah
penghindaran pajak…

Feb-20
Elements and Stages in Transfer Pricing
Analysis

3 Elements of Transfer Pricing Analysis 4 Stages of Transfer Pricing Analysis

Related transaction 1 Functional analysis

PT X Company X Company

2 Comparability analysis
Measure the arm’s length value of related transaction based on
reference transaction
Selection of transfer pricing
3
method
PT DD PT TC

Independent Independent
Reference transaction 4 Measure arm’s length value

10

Feb-20
Selection of Transfer Pricing Methods

The Most Appropriate Method

CUP RPM C+ TNMM PSM

Most Appropriate Method

CUP

RPM C+

TNMM PSM
11

Feb-20 11
 Transfer Pricing Documentation

…to demonstrated that reasonable efforts were

The role of Transfer Pricing Documentation undertaken to ensure that transfer prices are
consistent with the arm’s length
principle…

…adequate documentation will make easier to

tax authorities to review taxpayer’s
analysis and contribute to avoid dispute or
to a timely resolution of any transfer pricing
dispute…

“TP Documentation is not a burden, but is an opportunity.”

12

Feb-20
Global Transfer Pricing Landscape:
Trends

Global transfer pricing

landscape is now
changing!

Determinant factors:
Global financial crisis, voices from developing countries, NGO’s policy campaign, BEPS report, fighting tax
haven, global forum and multilateral organization, aggressive tax planning, contagion effect on TP case,
Panama Papers, simplification measures and hypothetical ALP , value creation issues
13

Feb-20
Global Transfer Pricing Landscape:
Trends
OECD BEPS Project

14

Feb-20
 Domestic Transfer Pricing Landscape:
Trends

The evolution…

1993 Dec Dec Apr Des

Sept Nov Nov May Oct Jan Oct
KEP-01 2009 2010 2014 2016
2010 2010 2011 2013 2013 2015 2015 2016
and SE- PER-39 PER- PMK- PMK
PER-43 PER-48 PER-32 PER-22 SE-50 PMK-07 PER-36 SE-39 213
04 69 240

What’s
Next?

15

Feb-20
 Domestic Transfer Pricing Landscape:
New Transfer Pricing Documentation and CbC Reporting –
Indonesia (MoF 213/2016)
Types of Documentations

A “master file” that consist of high level information

concerning the MNE group global operations and transfer
pricing policies.

A “local file” that consist of information regarding the

taxpayer specific business operations, financial information
Three-Tiered and affiliated transactions, including the transfer pricing
Approach analysis of the covered affiliated transactions.
A “CbC” report that consist of information including
amount of revenue, profits, income tax paid and accrued,
employees, retained earnings and assets. In addition,
information regarding functions performed and business
activities by each entity in a particular tax jurisdiction must
also be disclosed.

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Feb-20 16
 Thank you

Danny Septriadi, S.E., M.Si., LL.M Int. Tax

B. Bawono Kristiaji, S.E., M.S.E., M.Sc. ADIT

17

Feb-20
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