Terms of Application for Advance Pricing Agreement Amended

Jakarta. The Directorate General of Taxation (DGT) changed the rules on the implementation of the transfer price agreement or the Advance Pricing Agreement (APA), by issuing the Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 22/PMK. 03/2020, which is effective on 18 March 2020.

APA is an advance agreement between a multinational corporation and one or more tax authorities of another countries, in connection with a reasonable transaction price between parties that have a special relationship.

Based on DGT's written statement, there are several conditions for filing APA that have changed. First, APA submission can now be done directly through a formal application, no pre-lodgement procedures need to be preceded. In fact, the completeness of the documents can now be submitted after the notification is issued, stating that the request can be followed up.

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Second, the substance that can be submitted through APA can be all or part of domestic and foreign affiliate transactions. Third, the result of APA agreement is valid for a maximum of five years and can be applied to the previous tax years, or roll back.

In addition, APA can now be filed through the Tax Office (Kantor Pelayanan Pajak/KPP), where taxpayers are registered. The condition is that taxpayers must submit financial statements audited by public accountants and transfer pricing documents or TP Pricing Documents (TP Doc) for the last three tax years.

The applicant must also provide a detailed explanation of the implementation of the principles of fairness and business determination in determining the reasonable transfer price, for each transaction with the party having a special relationship.