Regulation PER 22/PJ/2013 has been published by the Indonesia’s Directorate General of Taxation (DGT) on 30 May 2013 to provide guidelines for audits of taxpayers with related-party relationships and repealed the regulation KEP-01/PJ 07/1993 which also provided the same guidelines regarding transfer pricing.
According to the new regulation the use of data from multiple-year on both the tested party and the independent comparables is required. However, the number of years of financial data to be used for undertaking such multiple-year analysis is not specified in the regulation.
The application of three different standards that may provide different results – the principle of “fairness”, “common business practice,” and the arm’s length principle is essential under the new regulation. The regulation authorizes the DGT to test the application of the arm’s length principle and to predetermine the amount of income and deductions in accordance with “fairness” and “common business practices” not influenced by special relationships.
According to the regulations, open sourced data (either foreign or domestic) from commercial databases, such as the London Metal Exchange and other databases should be used as sources of external comparables.
