Transfer Pricing Services in Indonesia

Transfer pricing is closely associated with corporate cross-border transactions. Inter-company transactions have grown rapidly in recent years and are now more complex than ever.

According to ASEAN Briefing’s transfer pricing guide for foreign investors in Indonesia, transfer pricing in Indonesia is regulated under the Income Tax Law of 2008, which authorises a tax officer to redetermine the tax income of a taxpayer who has a ‘special relationship’ with other taxpayers.

Transfer pricing applies to companies that transact between companies from the same group, such as a subsidiary, or other ‘related’ parties. The persons or entities are related if:

  • One party has direct or indirect control of the other (e.g., head offices or branch offices); or
  • Both parties are under the control of the same persons or entity (e.g., several subsidiaries being owned by the same parent company.)


Such conditions can give rise to preferential pricing between the parties, which could lead to the hiding of profits and underpaying taxes.

Under the Income Tax Law, a special relationship is deemed to exist if:

  • The taxpayer owns capital participation either directly or indirectly of at least 25-percent of another taxpayer;
  • The relationship between taxpayers through ownership of at least 25-percent of two or more taxpayers;
  • A family relationship through marriage or blood; or
  • The participation in management or technology even if there is no ownership.


The Arm’s Length Principle

Indonesia endorses the Arm’s Length Principle as the standard guide to transfer pricing. Under this principle, profits are taxed on where the profits are generated and where the real economic activities have occurred. (Source: ASEAN Briefing)

Transfer Pricing Documentation: Three Tiered System

Indonesia issued Regulation No.213/PMK.03/2016 (PMK 213) in 2016 introducing a three-tiered system to transfer pricing documentation. The three-tiered system consists of the following documents, which have to be submitted in Indonesian:

  • A Master File, that consists of the standardised information related to the business group.
  • A Local File, that consists of information specifically related to the transactions of the local taxpayer.
  • A Country-by-Country Report (CbC), which relates to the global allocation of the group’s income and taxes.

Document and Reporting Obligations

Master and Local File documentation obligations are imposed on taxpayers who, apart from having related-party transactions, must meet the following criteria:

  • Have gross revenue of more than IDR 50-billion for the previous fiscal year;
  • Taxpayers that conduct related-party transactions exceeding IDR 20-billion in the previous fiscal year;
  • Taxpayers that conduct related-party transactions exceeding IDR 5-billion pertaining to services, interest payments, or intangible goods; or
  • Taxpayers that conduct transactions with related parties located in a jurisdiction with a lower income tax rate than Indonesia.

The CbC reporting obligations are imposed on taxpayers that fulfil the following criteria:

  • Taxpayers that are considered the parent entity of a group with consolidated gross revenue of IDR 11-trillion ; or
  • Taxpayers that are not parent entities but are members of entities of a group with an ultimate parent entity that is a tax resident in a country that;
    • Does not have an exchange of information agreement with Indonesia;
    • Does not make CbC reports available to the Indonesian tax authorities; or
    • Do not impose obligations to file CbC reports.


Failure to comply with Indonesian transfer pricing policies and procedures, as well as provide the necessary documentation, may result in costly transfer pricing audits and significant additional tax liabilities or penalties. (Source: ASEAN Briefing)

Selection of Transfer Pricing Methods

There are five transfer pricing methods for tangible or intangible transactions in Indonesia. These are:

  • The comparable uncontrolled price (CUP) method;
  • The cost-plus method;
  • The resale price method;
  • The profit split method; and
  • The transactional net margin method (TNMM).

The CUP method is the most favoured method used by Indonesia’s Directorate General of Taxes (DGT), such as for royalty and interest payments. If the CUP method is not applicable, then the Indonesian tax authorities will apply the TNMM method. (Source: ASEAN Briefing)

Advance Pricing Agreements (APA)

The Directorate General of Taxes issued Regulation No.22/PMK.03/2020 (PMK-22) in 2020 regarding the procedure for implementing Advanced Pricing Agreements (APA).

An APA is an agreement between one or more taxpayers and one or more tax authorities to determine in advance a set of criteria, and within a specific period, for specific cross-border transactions. This is to ensure such transactions comply with the arm’s length principle as well as assist in avoiding transfer pricing disputes.

Under the latest regulation, an Indonesian taxpayer can submit an APA through a tax office where the taxpayer is registered based on:

  • The initiative from the taxpayer through a unilateral or bilateral APA; or
  • A written application submitted to the DGA for a bilateral APA from an overseas taxpayer.

APA application withdrawal and renewal

Taxpayers can withdraw from an APA application before the APA negotiation has been completed. A taxpayer, however, can submit an APA renewal application to the DGT within 12 months and up to six months before the last fiscal year. (Source: ASEAN Briefing)

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These are answers to questions we get asked the most about company set ups. If your question isn't here, drop us a line.

Of course. To do so, you need to engage with a local nominee service provider.
Yes, this particularly applies to import and export businesses. Instead of establishing a company, you can use an undername import service, also known as importer of record.
It should take between 1 to 1.5 months. For speedy incorporation, you can choose a shelf company (ready-made company) instead.
Yes. A joint venture company can be in the form of PT PMA (foreign company) or PT (local company). Requirements for each establishment are different.
Business Registration Number is proof that a company, regardless of type, is legally registered in Indonesia. A company that does not have a Business Registration Number may have to face dissolution.

Contact Our Consultants

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.

Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.