The government encourages taxpayers to take advantage of the Mutual Agreement Procedure (MAP) as an alternative solution for the settlement of double taxation disputes across jurisdictions.
MAP is a joint agreement procedure between tax authorities to resolve international tax disputes arising in the application of the Double Taxation Avoidance Agreement (DTA/P3B) or tax treaty, including those related to corrections of transfer pricing.
The MAP policy in Indonesia refers to the Minister of Finance Regulation (PMK) Number 49 / KMK.03 / 2019 on the procedure for the implementation of the Mutual Agreement Procedure. Meanwhile, the technical handling of MAP requests and the completion of follow-up joint agreements are further regulated through the Director General of Taxes Regulation Number PER-16 / PJ / 2020, which came into force in August 2020.
In essence, domestic taxpayers can apply for MAP to the Directorate General of Taxes (DGT) or the tax authorities of the DTA partner countries, if they feel getting improper tax treatment from each authority or even both.
To determine whether the request for implementation of the MAP can be followed up or not, DGT will examine the completeness of the application requirements and the suitability of the supporting materials. DGT will issue a notification letter of acceptance or rejection of the application at least a month after the MAP request is received. If the DGT does not issue a written notification until the specified deadline, the MAP request is deemed to be followed up.
For certain purposes, DGT can also initiate MAP by submitting written requests to taxpayers and related authorities in the DTA partner countries. If within eight months the request is not responded to by the relevant authorities in the partner country, the DGT will issue a notification letter of the revocation of the MAP request because it cannot be followed up.
Renewal of MAP
However, under PER-16 / PJ / 2020, the Taxpayer may renew the MAP request, as long as they meet the following conditions:
- DGT and the tax authorities of the tax treaty partner countries have made preliminary agreements in the minutes of the meeting of MAP regarding transfer price corrections or bilateral transfer price agreements and interpretation of DTA provisions;
- The application is submitted in writing by the tax authority of the DTA partner;
- The application is submitted no later than six months before the end of the deadline for MAP negotiation;
- A request for renewal can only be made once for each MAP implementation request.
According to the provisions of PER-16 / PJ / 2020, the Director General of Taxes forms a Discussion Committee which is tasked with determining the position of negotiation and reviewing as well as deciding whether the request for renewal of MAP can be approved or not. Once approved, the DGT will send a notification letter to the authorized officials of the DTA partner country and the taxpayer.
Subsequently, DGT will compile and sign a MAP decision not more than a month after receiving written notification from the authorized official of the DTA partner, stating that the MAP can be implemented. MAP negotiations will resume at least 24 months after the proposed renewal is accepted. (AGS)