Regulation Update
PMK 172/2023 Details Industry Analysis Provision on PKKU

By: Choirunisa Nadilla Safitri | Monday, 22 January 2024

PMK 172/2023 Details Industry Analysis Provision on PKKU

Provisions regarding industry analysis related to the arm's length principles (PKKU) are regulated in more detail in Minister of Finance Regulation (PMK) Number 172 of 2023 which took effect on 29 December 2023.

Previously, this regulation was a new regulation that revoked previous regulations such as PMK 213/PMK.03/2016, PMK 49/PMK.03/2019, and PMK 22/PMK.03/2020. Therefore, the three regulations are no longer valid.

Read: New Provisions Released, Submission of TP Doc Maximum One Month from Request

Article 6 of PMK Number 172 of 2023 outlines that industry analysis is carried out to identify seven factors that affect business performance in the industry.

The seven factors include:

  1. Type of product in the form of goods or services 
  2. Industry and market characteristics, such as market growth, market segmentation, market cycle, technology, market size, market prospects, supply chain, and value chain; 
  3. Competitors and the level of business competition; 
  4. Taxpayer's efficiency level and location advantage; 
  5. Economic conditions that affect business performance in the industry, such as inflation rate, economic growth, interest rate, and exchange rate/value; 
  6. Regulations that affect and/or determine success in the industry; and 
  7. Factors other than the factors referred to in number 1 to number 6 affect business performance in the industry. 

These factors were not elaborated on in the previous regulation, which only stated that industry analysis is part of the PKKU implementation stage, without elaborating on the object of the analysis.

Read: PMK 172/2023 Reorganizes VAT on Related Transactions, DGT Authorized to Adjust Selling Price

The description of the industrial analysis provisions of PMK No. 172 Year 2023 is not only more detailed than PMK Number 213/PMK.03/2016 and PMK No. 22/PMK.03/2020, but also compared to other regulations, namely the Appendix to Director General of Taxes Regulation Number PER-22/PJ/2013 and the Appendix to Director General of Taxes Circular Letter Number SE-50/PJ/2013.

The Appendix to PER-22/2023 only explains that one of the stages of identifying the characteristics of a taxpayer's related transaction is to pay attention to the conditions affecting the industry. Among others, it consists of the character of the Taxpayer's industry, identification of competitors, and economic and regulatory factors that affect the Taxpayer's business. 

Meanwhile, the Appendix of SE-50/PJ/2013 only explains that the taxpayer's industry analysis needs to pay attention to the main characteristics of the industry and industry performance.

Benefits and Global Benchmarks

In the context of preparing the TP Doc, industry analysis plays a central role in assessing the economic circumstances of related party transactions. PMK No. 172 of 2023 specifically emphasizes the importance of industry analysis as a comparability factor, in line with the principles of PKKU. 

The provisions regarding industry analysis in the preparation of the TP Doc, including PNK No. 172 of 2023, have referred to the OECD Transfer Pricing Guidelines 2022, as best practice or guidance on a global scale.

Industry analysis is implicitly explained in the explanation of economic circumstances in paragraph 1.130, which reads: 

“Arm’s length prices may vary across different markets even for transactions involving the same property or services; therefore, to achieve comparability requires that the markets in which the independent and associated enterprises operate do not have differences that have a material effect on price or that appropriate adjustments can be made. Economic circumstances that may be relevant to determining market comparability include the geographic location; the size of the markets; the extent of competition in the markets and the relative competitive positions of the buyers and sellers; the availability (risk thereof) of substitute goods and services; the levels of supply and demand in the market as a whole and in particular regions, if relevant; consumer purchasing power; the nature and extent of government regulation of the market; costs of production, including the costs of land, labor, and capital; transport costs; the level of the market (e.g. retail or wholesale); the date and time of transactions; and so forth.” 

Based on the paragraph, it can be concluded that industry analysis is one of the indicators that can be used to determine whether there are differences in economic circumstances between related and independent transactions that have a material effect on prices. Thus, taxpayers can determine what adjustments are appropriate for these economic circumstances. 

Thus, the issuance of PMK 172/2023 is in line with the OECD Transfer Pricing Guidelines 2022 and has attempted to provide certainty to taxpayers regarding the scope of industry analysis.

For the deepening of this policy, please contact us, MUC Consulting, through the WhatsApp application or through For information, MUC Consulting is a tax consulting company located in Jakarta and Surabaya. (ASP/KEN)


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