Important Reminder: Compliance with New Regulations on Arm’s Length Principle and Transfer Pricing Documents

The Minister of Finance has just released a new regulation No. 172 Year 2023 (“MoF-172”) regarding the implementation guideline for the application of the Arm’s Length Principle on Related-Party Transactions.

MoF-172 was released to revoke several MoF regulations as follows:

Minister of Finance Regulation No. 213 Year 2016 regarding TP Documentation (“TP doc”)
Minister of Finance Regulation No. 49 Year 2019 regarding Mutual Agreement Procedure
Minister of Finance Regulation No. 22 Year 2020 regarding Advance Pricing Agreement

To ensure your compliance with this regulation, we kindly remind you of the following:

The deadline for TP doc availability is still a maximum of 4 months from the end of Fiscal Year. However, please make sure that you comply with this deadline requirement, because in this regulation, a new condition is added that is the Directorate General of Taxes is authorised to request TP doc and the taxpayers must provide it within 1 (one) month since the request is issued. This is applicable not only during a tax audit, but also during compliance monitoring processes. Taxpayers who do not fulfil the obligation to provide TP doc shall be subject to sanctions in accordance with the provisions of taxation laws and regulations.
This regulation confirms the previous regulations regarding the Ex-Ante approach. This regulation emphasizes that TP doc must be prepared based on the data and information available at the time the transaction is carried out.

With this latest requirement regarding TP Doc, we advise companies that have the obligation to prepare TP doc for Fiscal Year 2024 to pay attention to this latest regulation. If the preparation of the TP doc is assisted by a Transfer Pricing consultant, we recommend initiating a discussion with them promptly to ensure that the implementation and documentation of the TP doc align with the regulatory provisions.

We will provide you a circular about the whole summary of MoF-172 for your future reference. Stay tuned for our next circular!

Attachments :
SS – 2024 – MoF 172 Year 2023