PMK 213 outlines new Indonesian transfer pricing documentation requirements following the OECD's BEPS actions. It establishes a three-tiered documentation approach including a master file, local file, and country-by-country report. Taxpayers meeting certain revenue or related-party transaction thresholds must prepare and have documentation available within four months of their year-end, submitting summaries to tax authorities. Failure to comply could result in tax risks and penalties by being deemed not to apply the arm's length principle. The changes aim to increase transparency around multinational group transfer pricing in line with international standards.

1. 1
Indonesia transfer pricing –
A response to the BEPS actions
January 2017
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and advisory services.
What is new?
Following the release of the OECD BEPS project actions in late 2015,
the Indonesian Minister of Finance recently issued regulation No.
213/PMK.03/2016 (“PMK 213”) concerning new transfer pricing
documentation requirements, with enactment on 30 December 2016.
PMK 213 outlines the new threshold of transfer pricing documentation
(TPD) obligation, the three-tiered documentation approach, timing of
preparing TPD, information required, compliance in filing and
consequences of not complying. TP documentation must be prepared
in Bahasa Indonesia1
and be available at the latest by the end of the
fourth month after the book year ends. A summary of master and
local files is required to be filed to the local tax authorities as an
attachment in the annual income tax filing. Lack of compliance may
result in potential tax risks and exposures.
In light of the enactment of the regulation, PMK 213 has an immediate
impact on taxpayers for fiscal years ending 30 December 2016
onwards. Taxpayers need to undertake immediate action to prepare
the master and local files so as to enable on-time filing of the
Attachment B in the annual income tax filing, whose due date is
approaching.
1
Taxpayers who are granted approval to maintain their bookkeeping in English and foreign currency can do the TPD in English,
followed by the translation in Bahasa Indonesia.

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What is new in PMK 213?
PMK 213 is an implementation of BEPS Action 13 pertaining to the country by country reporting (CbCR),
as one of the four minimum standards under the BEPS projects which are expected to be converted into
the local tax regulations, namely Action 5 – countering harmful tax practices, Action 6 – preventing treaty
abuse, and Action 14 – enhancing dispute resolution.
PMK 213 prevails over the existing transfer pricing regulations and guidelines in the event of any
inconsistencies. The regulation outlines the following:
 three-tiered documentation approach
 new threshold of transfer pricing documentation (TPD) obligation
 timing in preparing TPD
 information required in the master file, local file, and country-by-country reporting (CbCR).
 compliance in filing
 consequences of not complying
What is new in PMK 213? Remarks
What is the three-tiered
documentation approach?
A TPD comprises:
 Master file
 Local file, and/or
 Country by country reporting (CbCR)
New threshold of TPD
obligation
The master file and local file are mandatory for taxpayers fulfilling the
conditions below:
 Prior year’s gross revenue2
exceeds IDR 50 billion (equivalent to USD
3.7 million), or
 Prior year’s related-party transactions exceed:
 IDR 20 billion (equivalent to USD 1.5 million) for transfer of tangible
goods
 IDR 5 billion (equivalent to USD 375,000) for each of these
transactions: provision of services, payment of interest, utilization of
intangible goods, or other related-party transactions, or
 Transaction(s) with related party(ies) in other jurisdictions which have a
lower income tax rate than that of Indonesia.
The CbCR is required for a local taxpayer being a member of a group of
entities fulfilling the following conditions cumulatively:
2
Generated from the main business activities. Amount before discount, rebates and other deductions.

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What is new in PMK 213? Remarks
 Directly or indirectly controls one or more of other members of the
group;
 Is obliged to prepare consolidated financial statements in accordance
with the Indonesian accounting standards and/or by Indonesian stock
exchange regulations;
 Has a minimum of IDR 11 trillion (equivalent to USD 825 million) of
consolidated gross revenues3
.
Nevertheless, a local taxpayer that is not the parent company of a group of
entities is required to prepare CbCR, to the extent the jurisdiction where the
parent company resides satisfies the conditions below:
 Does not require CbCR;
 Does not have exchange of information (EoI) with the Indonesian
government; or
 Has an EoI agreement with Indonesia, but the CbCR is unobtainable.
Timing in preparing and
reporting TPD
The master file and local file:
 are prepared based on the data and information available by the time
the transaction is conducted. A statement letter signed by taxpayer is
required that explains the timing of the preparation of the master file and
local file. What if the taxpayer does not comply? See further discussion
below.
 must be available at the latest by the end of the fourth month after the
book year ends. Form Summary of Master File and Local File
(attachment B) is required as an attachment in the annual income tax
filing.
CbCR:
 is prepared based on the data and information available up to the book
year end. Form CbCR (attachment E), Form CBC-1, Form CBC-2 and
Form CBC-3 (additional on necessity) are required as attachments in
the annual income tax filing. What if the taxpayer does not comply? See
further discussion below.
 must be available at the latest twelve months after the book year ends.
Availability of TPD for
particular purposes
The DGT may request the master file and local file for purpose of the
followings:
 compliance purpose, tax audit, preliminary tax crime investigation or
investigation.
3
ibid

4. 4
What is new in PMK 213? Remarks
 Objection process, reduction or cancellation of administrative penalty,
reduction or cancellation of incorrect tax assessment or tax collection
letter.
Failure to provide the requested TPD within the timeline would mean that the
TPD is not considered (if provided late) or the taxpayer is deemed as not
complying with the TPD obligation (not provided at all), which implies
potential tax exposures and risks.
Compliance efforts TPD must be made available in Bahasa Indonesia, except that certain
taxpayers that are granted approval from the Minister of Finance to conduct
bookkeeping in English and foreign currency may use English in their TPD;
however, a translation in Bahasa Indonesia must be made available.
Master file and local file - Form Summary of master file and local file
(attachment B) is required as an attachment in the annual income tax filing.
CbCR - Form CbCR (attachment E), Form CBC-1, Form CBC-2 and Form
CBC-3 (additional on necessity) are required as attachments in the annual
income tax filing.
Information required in the
master file
 Shareholding structure including the jurisdiction of each entity under the
group of companies
 Business activity
 Intangible assets possessed
 Financial activities and financing, and
 Consolidated financial statements and tax information pertaining to
transactions with related party(ies)
Information required in the
local file
 Identity and business activity
 Information on the transactions with related party(ies) and third party(ies)
 The implementation of the arm’s length principle
 Financial information
 Non-financial events/facts affecting the pricing policy or profit margin.
Information required in the
CbCR
 Revenue allocation, tax paid and business activity of each entity under
the group, locally and overseas, including name of country, revenues,
profit/loss before tax, income tax paid/withheld, income tax liability,
capital, retained earnings, number of employees, and tangible assets
other than cash and cash equivalent.
 List of entities under the group companies and the main business activity
of each entity.

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What if a taxpayer has a related-party transaction but does not fall within the threshold?
Under PMK 213, such taxpayers still have the obligation to apply the arm’s length principle in accordance
with the prevailing tax regulations.
Consequences of not complying with PMK 213
Failure to comply with the timing of preparation of TPD would result in the taxpayer being deemed as not
applying the arm’s length principle. Failure to comply with the mandatory reporting may result in the income
tax return filed being be treated as incomplete, which implies potential tax risks and exposures.
Key notes
With the enactment of PMK 213, taxpayers need to undertake immediate action steps to prepare their
three-tiered documentation so as to enable on time filing of the necessary attachment in the annual income
tax return, whose due date is approaching. For purpose of compliance monitoring, the DGT may request
the master file and local file which have to be provided within certain timeline. Further, the transparency of
CbCR may possibly trigger further challenges from the local tax authorities, and therefore needs to be
properly arranged.
The content of this newsletter is for the purpose of general guidance on matters of interest and is not meant
as advice. The implementation and impact of laws/regulations can vary widely based on the specific facts
involved. Readers are advised to consult their tax advisors before making any business decisions.
CONTACT
Julia Yang
Phone：+62 21 2902 6677
E-mail：julia.yang@mazars.id
Please visit our website for more information www.mazars.id