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If your company engages in related-party transactions, the question is not only “Do we need Transfer Pricing Documentation?” but also “Are we fully compliant?”
With the latest PMK 172/2023 regulation, the Indonesian tax authority has raised the bar on what is expected. Missing a single detail could mean penalties, audits, and unnecessary headaches.
Transfer Pricing Documentation (TP Doc) is more than a legal requirement. It is your company’s defense shield against tax disputes. Whether you are dealing with goods, services, or intangible assets, the government expects proof that your pricing is fair, transparent, and aligned with the arm’s length principle.
Why Transfer Pricing Matters for Group Companies
PMK 172/2023, effective 29 December 2023, replaces previous transfer pricing guidelines and brings Indonesia closer to global standards like the OECD Guidelines. The regulation introduces stricter documentation requirements, enhanced comparability rules, and shorter response times for audits.
In short: compliance is no longer optional, it is strategic.
For group companies, this means more than just preparing documents. It requires a fundamental review of intercompany arrangements to ensure that legal agreements, actual conduct, and financial outcomes are fully aligned. Tax authorities are now looking beyond the paperwork as they want to see substance. Every claim, whether about services, intangibles, or financial transactions, must be supported by clear evidence and robust analysis.
This shift also reflects Indonesia’s commitment to tackling Base Erosion and Profit Shifting (BEPS). By tightening the rules, the government aims to ensure that profits are taxed where value is created. For multinational groups, this means greater scrutiny of transfer pricing policies and a higher expectation for transparency across jurisdictions.
Is Your Company Required to Prepare TP Documentation?
Not all companies are required to prepare TP Docs, but if you meet any of these conditions, you fall under the obligation:
Annual gross revenue exceeding IDR 50 billion in the previous fiscal year
Transactions with affiliates in jurisdictions with lower corporate income tax rates than Indonesia
Related-party transactions exceeding:
IDR 20 billion for tangible goods
IDR 5 billion for services, interest payments, intangible assets, or other related-party transactions
The Three-Tiered Documentation Structure
If you qualify, under PMK 172/2023, you must prepare these three TP documents, aligning with global best practices.
The Master File (Dokumen Induk) provides a global perspective of the multinational group, including its organisational structure, business activities, and transfer pricing policies.
The Local File (Dokumen Lokal) focuses on the Indonesian entity, detailing related-party transactions, functional analysis, and benchmarking studies to justify pricing.
Finally, the Country-by-Country Report (CbCR) is required for ultimate parent entities with consolidated group revenue of at least IDR 11 trillion in the preceding fiscal year. This report gives tax authorities a clear view of global profit allocation and tax positions.
Commonly Overlooked Information in TP Documentation
Even companies that prepare TP Docs often miss critical details that can trigger audits. For example, many fail to include a comprehensive organisational chart showing ownership and control relationships. Others neglect to maintain signed intercompany agreements that reflect actual conduct.
Tax authorities also expect a benefit analysis for intra-group services, proving that these services provide real economic value and are not duplicative. Similarly, companies often overlook proper documentation for intangibles, including ownership and development costs.
Another common issue is financial inconsistencies. Figures in the TP Doc must reconcile with audited financial statements and tax returns. And do not forget local market analysis and clear cost allocation methods for shared services or management fees. Missing these elements can lead to adjustments, penalties, or prolonged audits.
PMK 172/2023 is a wake-up call for group companies. Transfer pricing compliance is now a strategic priority. The rules are stricter, the timelines are shorter, and the scrutiny is higher. If your group operates across multiple jurisdictions, now is the time to review your policies and documentation.
Do not wait for an audit to find the gaps. Start building a robust transfer pricing framework that can withstand regulatory scrutiny.