PROCEDURES ON THE ESTABLISHMENT AND IMPLEMENTATION OF ADVANCE PRICING AGREEMENT

inspired Together we grow

PROCEDURES ON THE ESTABLISHMENT AND IMPLEMENTATION OF

ADVANCE PRICING AGREEMENT

Hadori Sugiarto Adi & Rekan A member of HLB International

Vol. 17 December 2016

Table of contents 1. Foreword 2. Procedures on the Establishment and Implementation of Advance Pricing Agreement 3. Key Contacts

Foreword Welcome to the seventeenth issue of Inspired! For this edition, we would like to inform the procedures on the establishment and implementation of Advance Pricing Agreement (APA). Based on the regulation by the Minister of Finance of the Republic of Indonesia No. 7/PMK.03/2015, the Director General of Taxation (DGT) has authority to make an agreement with the taxpayers and cooperate with the tax authorities of other countries to determine the price of transaction with the related parties that are valid for certain period. We have received various inputs/comments from our readers on the prior issues. This creates a room for discussion on practical and relevant issues to our clients. Since we want the journal to be as relevant as possible to your business needs, we look forward to hearing your inputs on each issue. If you wish us to write an article on topics relevant to your business needs, please e-mail us. Contact details are furnished at the last part of this journal.

Adi Wirawan Senior Partner December 2016

“Hadori Sugiarto Adi & Rekan (Hadori) is a registered public accounting and business advisers firm, established in 1973, with offices located in Jakarta, Surabaya, Yogyakarta and Semarang, and comprises of 14 partners and more than 225 professionals. Hadori is a member of HLB International.”

Procedures on the Establishment and Implementation of Advance Pricing Agreement Pada bulan Oktober 2015, HLB telah menerbitkan Inspired Vol. 3 mengenai Harga Transfer. Untuk edisi kali ini, kami ingin melanjutkan pembahasan lebih dalam tentang Harga Transfer yaitu mengenai tata cara pembentukan dan pelaksanaan Kesepakatan Harga Transfer (KHT).

On October 2015, HLB has issued Inspired Vol. 3, regarding Transfer Pricing. For this edition, we want to discuss further matters related to Transfer Pricing which relates to the procedures on the establishment and implementation of Advance Pricing Agreement (APA).

Mengapa “Kesepakatan diperlukan?

Why is “Advance required?

Harga

Transfer”

Pricing

Agreement”

Pada tanggal 12 Januari 2015, Menteri Keuangan menerbitkan Peraturan Menteri Keuangan Republik Indonesia nomor 7/PMK.03/2015 tentang Tata Cara Pembentukan dan Pelaksanaan Kesepakatan Harga Transfer (KHT). Berdasarkan peraturan tersebut, Direktur Jendral Pajak memiliki wewenang untuk melakukan perjanjian dengan Wajib Pajak dan bekerja sama dengan pihak otoritas pajak negara lain untuk menentukan harga transaksi antar pihak-pihak yang berelasi yang berlaku selama suatu periode.

On January 12, 2015, the Minister of Finance issued Regulation of the Minister of Finance of the Republic of Indonesia No. 7/PMK.03/2015, regarding the procedures on the establishment and implementation of Advance Pricing Agreement (APA). Based on this regulation, the Director General of Taxation (DGT) has authority to make an agreement with the taxpayers and cooperate with the tax authorities of other countries to determine the price of transaction with the related parties that are valid for certain period.

Perjanjian yang dimaksud adalah “Kesepakatan Harga Transfer” atau (KHT) yang bertujuan untuk membuat suatu kesepakatan dalam menentukan harga transfer dan kriteria-kriteria dalam penentuan harga transfer selama periode tertentu antara Direktur Jenderal Pajak (DJP) dan Wajib Pajak.

This agreement is referred to as “Advance Pricing Agreement” or (APA) which aims to create an agreement in determining the transfer price and the criteria for determining the transfer price for a certain period between Director General of Taxation (DGT) and the taxpayers.

Dengan adanya KHT, maka Wajib Pajak dapat melakukan transaksi dengan pihak berelasi dengan harga yang telah disepakati antara Wajib Pajak dan DJP, sehingga risiko Wajib Pajak mendapatkan denda pajak atas transaksi tersebut dapat dihindarkan.

With the APA, transactions with has been agreed DGT, so the risk with tax penalty avoided.

the taxpayer can conduct related parties at a price that between the taxpayer and the of the taxpayer to be charged on the transaction may be

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Berikut ini diagram yang menggambarkan proses tahapan pembentukan Kesepakatan Harga Transfer (KHT)/The following diagram illustrates the process stages on the establishment of Advance Pricing Agreement (APA):

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6

7

Permohonan pembicaraan awal dengan DJP/ Request for preliminary discussions with DGT

Analisa, evaluasi & pembahasan pemohonan KHT oleh tim pembahas/ Analysis, evaluation & discussion of the APA application by the assessor team

Pembahasan KHT melalui Prosedur Persetujuan Bersama (PPB)/The discussion of the APA through Mutual Agreement Procedure (MAP)

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3 Pembicaraan Awal dengan DJP/ Preliminary discussions with DGT

5

Pembentukan Tim pembahas KHT oleh DJP/ Establishment of the assessor team of the APA by the DGT

4

Penyampaian undangan dari DJP kepada Wajib Pajak/ Invitation from the DGT to the taxpayer

Pengajuan permohonan KHT oleh Wajib Pajak kepada DJP/Application of APA from taxpayer to the DGT

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8 Penyusunan Naskah KHT/ The preparation of the APA documentation

Penerbitan Keputusan DJP/ Issuance Decree of the DGT

Keterangan:

Explanation:

1. Pemohonan pembicaraan awal harus diajukan paling lambat 6 (enam) bulan sebelum dimulainya tahun pajak yang akan dicakup dalam KHT. 2. Pembicaraan awal dengan DJP dapat dilakukan lebih dari 1 (satu) kali. 3. Surat undangan dari DJP kepada Wajib Pajak disampaikan paling lambat 1 (satu) bulan sebelum dimulainya tahun pajak yang akan dicakup dalam KHT. 4. Permohonan KHT dan dokumen pendukung harus diterima oleh Direktur Peraturan Perpajakan II paling lambat pada akhir tahun pajak sebelum dimulainya tahun pajak yang dicakup dalam KHT. 5. Setelah permohonan KHT telah diterima, DJP membentuk tim pembahas KHT.

1. The request of the preliminary discussions should be submitted not later than 6 (six) months before the beginning of the tax year to be covered in APA. 2. The preliminary discussions with the DGT can be done more than 1 (one) time. 3. The invitation letter from the DGT to the taxpayers issued not later than 1 (one) month before the beginning of the tax year to be covered in APA. 4. The application of the APA and supporting document must be accepted by the Director of Tax Regulation II not later than the end of year before the beginning of the tax year to be covered in APA. 5. After the application of APA has been accepted, the DGT must establish the assessor team of the APA. 6. The assessor team of the APA is tasked to the analysis and evaluates the application of APA.

6. Tim Pembahas KHT bertugas untuk menganalisa dan mengevaluasi permohonan KHT.

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7. Pembahasan KHT dengan wajib pajak meliputi :  Ruang lingkup transaksi dan tahun pajak yang akan dicakup.  Analisis kesebandingan, pemilihan, dan penentuan data pembanding.  Penentuan metode harga transfer yang tepat.  Kondisi dan faktor-faktor yang mempengaruhi asumsi kritikal dalam penerapan metode harga transfer.  Penjelasan mengenai ada atau tidaknya pengenaan pajak berganda. Jika diketahui KHT dapat menyebabkan terjadinya pengenaan pajak berganda, DJP dapat mengajukan Prosedur Persetujuan Bersama (PPB) kepada Otoritas Pajak Negara Mitra. 8. Hasil pembahasan KHT yang berupa kesepakatan antara DJP dan Wajib Pajak ditindaklanjuti dengan penyusunan naskah KHT. 9. Setelah naskah KHT selesai disusun, DJP menerbitkan keputusan yang mengenai Naskah KHT dan pelaksanaan Naskah KHT tersebut.

7. The discussion of APA with the taxpayer are as follows:  The scope of transactions and tax years to be covered.  Proportional analysis, the selection and determination of comparative data.  Determination of appropriate transfer pricing method.  The conditions and factors affecting critical assumption in the implementation of transfer pricing method.  The explanation of the presence or absence of double taxation. If it is known that the APA can lead to double taxation, the DGT may file a Mutual Agreement Procedure (MAP) to the Tax Authority Partner.

Informasi apa saja yang wajib dimuat naskah KHT?

What information is required on the APA documentation?

Naskah KHT paling sedikit wajib memuat :

The APA document must contain, at least:

1. Nama wajib pajak, Nomor Pokok Wajib Pajak (NPWP), alamat Wajib Pajak, serta identitas pihak berelasi yang terkait dengan KHT.

1. Name of the taxpayer, Taxpayer Identification Number (TIN), address of the taxpayer and the identity of the related parties associated with APA. 2. Scope of transaction to be covered. 3. The tax year to be covered. 4. General conditions used in APA. 5. Transfer Pricing Method agreed. 6. The factors affecting the critical assumptions on the implementation of the Transfer Pricing Method. 7. Fair price or fair profit, or ranges of fair price or ranges of fair profit for every type of goods/services or transactions to be covered.

2. 3. 4. 5. 6.

Ruang lingkup transaksi yang dicakup. Tahun pajak yang dicakup. Ketentuan umum yang digunakan dalam KHT. Metode Harga Transfer yang disepakati. Faktor-faktor yang mempengaruhi asumsi kritikal penerapan Metode Harga Transfer.

7. Harga Wajar atau Laba Wajar, atau rentang Harga Wajar atau rentang Laba Wajar untuk setiap jenis barang/jasa atau transaksi yang dicakup. 8. Kewajiban yang harus dilaksanakan dalam penerapan KHT dan kewajiban pelaporan.

8. The result of discussion on the APA in the form of an agreement between the DGT and the taxpayer followed by the preparation of the APA documentation. 9. After APA documents are completed, the DGT will issue the decree regarding the APA documentation and the implementation of the APA document.

8. Obligation that must be fulfilled in the implementation of the APA and reporting obligation.

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Konsekuensi hukum. Kerahasiaan informasi. Peninjauan kembali dan pembatalan. Mekanisme penyelesaian masalah yang timbul dari penerapan KHT. 13. Kondisi yang menyebabkan DJP dapat meninjau atau membatalkan KHT. 14. Informasi lain yang mendukung.

9. 10. 11. 12.

Apa saja metode yang digunakan Penentuan Harga Transfer?

untuk

Any method used to Determine Transfer Pricing?

Terdapat 5 (lima) metode yang digunakan untuk menentukan harga transfer, antara lain:

There are 5 (five) methods used to Transfer Pricing, are as follows:

9. 10. 11. 12.

Legal consequences. Confidentiality of information Review and cancellation Mechanisms for the resolution of problem arising from the implementation of APA. 13. Conditions that cause DJP to review or cancel APA. 14. Other supporting information.

1. Metode Perbandingan Harga antara Pihak 1. Price Comparison Method with Unrelated yang tidak berelasi Parties This refers to transfer pricing method that is Adalah metode penentuan harga transfer performed by comparing the prices of yang dilakukan dengan membandingkan transactions conducted between related harga dalam transaksi yang dilakukan antara parties with a price of transactions conducted pihak berelasi dengan harga dalam transaksi with third parties under comparable yang dilakukan dengan pihak ketiga dalam conditions or circumstances. kondisi atau keadaan yang sebanding. 2. Metode Harga Penjualan Kembali 2. Resale Price Method This refers to transfer pricing method done Adalah metode penentuan harga transfer by comparing the prices of the transactions yang dilakukan dengan membandingkan of a product that are conducted between the harga dalam transaksi suatu produk yang related parties to the resale price of the dilakukan antara pihak berelasi dengan harga product after deducting the reasonable gross jual kembali produk tersebut setelah dikurangi profit, which reflect the functions, assets and laba kotor wajar, yang mencerminkan fungsi, risks, on the resale of these products to third aset dan risiko, atas penjualan kembali produk parties or resale products are made in tersebut kepada pihak ketiga atau penjualan normal condition. kembali produk yang dilakukan dalam kondisi wajar. 3. Metode Biaya-Plus Adalah metode penentuan harga transfer yang dilakukan dalam menambahkan tingkat laba kotor wajar yang diperoleh perusahaan yang sama dari transaksi dengan pihak ketiga atau tingkat laba kotor wajar yang diperoleh perusahaan lain dari transaksi sebanding dengan pihak ketiga pada harga pokok penjualan yang telah sesuai dengan prinsip kewajaran dan kelaziman usaha.

3. Cost-Plus Method This refers to the method of transfer pricing done by adding the reasonable gross profit rate obtained by the same company from transactions with third parties or the reasonable gross profit rate obtained by the another company from comparable transactions with third parties at the cost of sales in accordance with the arm’s length principles

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4. Metode Pembagian Laba 4. Profit Split Method This refers to transfer pricing method based Adalah metode penentuan harga transfer on transactional income done by identifying berbasis laba transaksional yang dilakukan the combined income on affiliate transactions dengan mengidentifikasi laba gabungan atas that will be shared by related parties by using transaksi afiliasi yang akan dibagi oleh pihakthe acceptable basic economics which pihak berelasi tersebut dengan menggunakan provides an estimate of profit distribution dasar yang dapat diterima secara ekonomi which is likely to occur and will be reflected in yang memberikan perkiraan pembagian laba the agreement between the third parties. yang selayaknya akan terjadi dan akan tercermin dari kesepakatan antar pihak-pihak ketiga. 5. Metode Laba Bersih Transaksional 5. Transactional Net Margin Method This refers to the transfer pricing method Adalah metode penentuan harga transfer done by comparing the percentage of net yang dilakukan dengan membandingkan operating income to the cost, to the sales, to persentase laba bersih operasi terhadap the assets or the other basis for transactions biaya, terhadap penjualan, terhadap aset atau between related parties with a percentage of terhadap dasar lainnya atas transaksi antara net operating income earned on transactions pihak-pihak berelasi dengan persentase laba comparable to third parties or a percentage bersih operasi yang diperoleh atas transaksi of net operating income obtained on sebanding dengan pihak ketiga atau comparable transactions carried out by third persentase laba bersih operasi yang diperoleh parties. atas transaksi sebanding yang dilakukan oleh pihak ketiga. Kesimpulan

Conclusion

Dari pembahasan di atas dapat diambil kesimpulan, bahwa DJP memberikan kesempatan kepada Wajib Pajak untuk membuat suatu kesepakatan dalam menentukan harga transfer yang wajar atas transaksi dengan pihak berelasi sesuai dengan peraturan yang berlaku. Kesepakatan tersebut harus didokumentasikan ke dalam Kesepakatan Harga Transfer (KHT). Jika Anda membutuhkan lebih banyak informasi mengenai Kesepakatan Harga Transfer, kami dapat membantu Anda.

From the discussion above, it can be concluded that the DGT provides an opportunity for the taxpayer to make an agreement in determining reasonable transfer prices on related parties transactions in accordance with applicable regulation. The agreement must be documented in an Advance Pricing Agreement (APA). If you need more information regarding Advance Pricing Agreement, we can help you.

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Key Contacts Should you need further clarification on the information included in this issue, or would require any assistance in the implementation of the new accounting standards, taxation, regulation, and any other inquiries on our advisory services, kindly send us an email at [email protected] or call us at +62-21-5761667. Adi Wirawan Senior Partner [email protected]

Wahyu Wibowo Partner [email protected]

Yulianti Sugiarta Partner [email protected]

Wijanarko Partner [email protected]

Riza Manalo Paguio Senior Technical Advisor [email protected]

Velix Sogen Partner [email protected]

Contributors: Yudianto P. Silianto [email protected] Sri Agustina [email protected] Cover Photo: Yudianto P. Silianto

Cover Photo Location: Payangan Beach, Jember, East Java

HLB International is a leading global network of independent professional accounting firms and business advisers. We are present in 130 countries worldwide, with our member firms providing a comprehensive array of audit & accounting, tax and advisory services to a broad range of clients of all industry sectors. A member of the International Federation of Accountants Forum of Firms, HLB International is committed to the highest quality standards in financial reporting and auditing practices with all our members meeting specific quality criteria both nationally and internationally. With member firms well established in their markets, HLB International offers an ideal combination of local expertise and international skills. Our member firms support you as you grow regionally by becoming and globally, ensuring the same partner-led high-quality and personalised service wherever you operate. About Hadori Sugiarto Adi & Rekan Hadori & Rekan is a registered public accounting and business advisers firm. We have been established since 1973, with offices located in Jakarta, Surabaya, Yogyakarta and Semarang. The firm represents a group of specialist providing business advices and services to a wide range of business organizations, including private, public, stateowned enterprises and not-for-profit organizations. Since 1988, Hadori & Rekan joined HLB International, a worldwide accounting firms and business advisers. Having this membership each member firm has the right to use HLB in their name to present a blend of international and local name. It emphasizes the strength of both the international organization and the local firm whilst, at the same time, demonstrating the close bond between the two. Accordingly, the brand name Hadori & Rekan change to Hadori & Rekan (currently Hadori Sugiarto Adi & Rekan). Such change has been approved by the Ministry of Finance. As a member of HLB International, Hadori Sugiarto Adi & Rekan is part of a worldwide network of respected public accounting and business advisory firms in 130 countries, with 1,900 partners and 17,000 staffs in 600 offices worldwide. This publication contains general information only and is not intended to be comprehensive or to provide specific accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any Verdict or action that may affect you or your business. Before making any Verdict or taking any action that may affect you or your business, you should consult a qualified professional advisor. Whilst every effort has been made to ensure the accuracy of the information contained in this publication, this cannot be guaranteed, and neither HLB International nor any related entity shall have any liability to any person or entity that relies on the information contained in this publication. Any such reliance is solely at the user’s risk. © 2016 Hadori Sugiarto Adi & Rekan