This web page is dedicated to provide a clear and comprehensive guidance regarding Advance Pricing Agreement (APA) and Mutual Agreement Procedure in Indonesia as our commitment to implement OECD/G20 BEPS Action 14: Making Dispute Resolution More Effective.

If you wish to proceed to the Guidance on APA, please click this link: Advance Pricing Agreement. Or, if you wish to proceed to the Guidance on MAP, please click this link: Mutual Agreement Procedure.

 

Advance Pricing Agreement (APA)


Introduction

Directorate General of Taxes (DGT) has run an Advance Pricing Agreement (APA) Program since 2010 to assist businesses in determining the most appropriate methodology to derive the arm’s length outcome for complex transfer pricing issues and prevent disputes arising that may otherwise result in a Mutual Agreement Procedure (MAP) being necessary later.

This APA Guidance is expected as general guidance for taxpayer intended to enter into the APA program, and accordingly should be read in conjunction with Minister of Finance Regulation No.7/PMK.03/2015 concerning The Procedures for Advance Pricing Agreement.

Definition of APA

1. An advance pricing agreement (APA) is a written agreement made by and between:

  1. Director General of Taxes and Taxpayer; or
  2. Director General of Taxes and Tax Authority of Treaty Partner Country or Treaty Partner Jurisdiction which involves Taxpayer

as referred to in Article 18 Paragraph (3a) Income Tax Law of 1984 and its amendments thereto in order to agree upon the criteria and/or determine arm’s length price or arm’s length profit in advance.

The aim of APA

2. DGT has found that where there is considerable difficulty or doubt in determining the method by which the arm’s length principle should be applied, the transfer pricing issues can be more efficiently dealt with in real time as they arise rather than retrospectively years later when, for example, key personnel in the business may have moved on.

3. An APA is used to prevent disputes on transfer pricing issues.

4. The potential scope of an APA is flexible. It may relate to all the transfer pricing issues of the business or be limited to one or more specific transactions.

5. The APA legislation doesn’t provide for a determination that a permanent establishment (PE) does or doesn’t exist.

6. DGT does not levy any charge on the business for their assistance during the APA program. All services provided by DGT during APA process are free of charge.

Unilateral, bilateral or multilateral agreement

7. A binding agreement between an Indonesian taxpayer and DGT in accordance with Article 3 Paragraph (1) a MoF Regulation No.7/PMK.03/2015, is referred to as a “unilateral APA”. Although this agreement confirms the tax treatment in Indonesia, it doesn’t determine how the issues are to be resolved in any other country involved. Consequently, it doesn’t normally eliminate the risk of double taxation in relation to the transfer pricing issues it addresses. In order to achieve that comprehensively in the case of cross-border transfer pricing issues, where a Double Taxation Agreement (DTA) exists between Indonesia and the other country containing a MAP article, DGT, in accordance with Article 3 Paragraph (1) b MoF Regulation No.7/PMK.03/2015, would have to reach agreement also with the administration of the other country: this is referred to as a ‘bilateral APA’,

8. Businesses operating in several countries may wish to seek APAs that involve all the relevant administrations affected by the transfer pricing issues. Taxpayers may apply for multilateral APAs by requesting for multiple bilateral APAs. Indonesian CA will immediately follow up such requests by contacting the CA of treaty partners.

9. An Indonesian taxpayer may request for bilateral APA and unilateral APA for the same period yet different transaction. In that case, the application shall be submitted separately. For instance, the taxpayer has three related party transactions, i.e. sale of goods, purchase of raw materials and royalty payment. The taxpayer may, in this case, apply for unilateral APA for the sale of goods and purchase of raw materials, while at the same time apply for bilateral APA for the royalty payment.

10. The choice between unilateral APA and bilateral APA depends on taxpayer’s preference taking into account the availability of APA program in the treaty partner’s domestic legislation.

APAs - who may apply

11. An APA may be requested by any:

  • Indonesian resident taxpayer to DGT; or
  • Resident taxpayer from Partner Country or Partner Jurisdiction to the relevant APA unit in the said Country or Jurisdiction.

12. Every APA request will be considered on the basis of its particular facts and features, but generally DGT will be looking at the following factors taken together, whether:

  • the transfer pricing methodology proposed best achieves consistency with the transfer pricing rules and guidelines;
  • the cross border conditions between entities (actual conditions) that are the subject of the proposed APA have already been entered into and the actual conditions are unlikely to change significantly in the period of the APA;
  • the transfer pricing issues are uncertainty as to how the transfer pricing rules apply.

13. APAs won’t be declined solely by reference to the size of the transactions giving rise to the transfer pricing issues, because DGT recognizes that transfer pricing issues can be encountered by smaller businesses as well as by large multinationals.

14. When an Indonesian taxpayer business does obtain an APA, and the provision in question is made or imposed with a related Indonesian taxpayer, DGT may seek to avoid such issues by encouraging the business to apply the transfer pricing methodology as agreed in APA for the commercial purposes.

The initial contact - the Prelodgement process

15. The APA process is initiated by the taxpayer, but DGT always strongly recommends that taxpayer interested in applying for an APA contacts us first to informally discuss its plans before presenting a formal application. This is the prelodgement stage. Prelodgement is conducted to ensure that the resources of the business aren’t wasted, on an unsuitable application, and to ensure that the detailed work that will need to be undertaken by the business in finalising its application is focused on relevant issues. It is also to build the cooperative relationship essential to the entire APA process in order to reach mutually agreed outcomes. In building this type of relationship, it is necessary to align taxpayer and DGT expectations as much as possible by outlining a realistic anticipated timetable for agreeing an APA based on past experience, or to discuss other practical issues with the business.

16. The contact details for prelodgement in an APA and for making an APA application could be found in part Indonesian CA Contacts below. Taxpayer should also make their Account Representative aware of their interest in an APA and send them a copy of the correspondence.

17. Taxpayer who submits prelodgement request shall submit a written agreement to provide all required documents in APA application process and it shall be supplemented with supporting documents as follows:

  • explanation from taxpayer regarding the reason(s) of APA application;
  • explanation regarding taxpayer's activities and business;
  • explanation regarding taxpayer's business plan;
  • business structure which covers group business structure, ownership structure and organization structure;
  • explanation regarding shareholders and explanation regarding transaction made by shareholders with the taxpayer;
  • explanation regarding the affiliated parties and detailed explanation regarding transaction made by those affiliated parties with taxpayer;
  • explanation regarding transaction with related parties for the last 3 (three) tax years if there is any;
  • explanation on transactions proposed to be discussed and covered in APA and the explanation regarding those transactions;
  • transfer pricing method and explanation regarding comparability analysis, functional analysis, selection and designation of comparable and selection of transfer pricing method;
  • explanation regarding situation or circumstances in taxpayer's activity or business whose change may have material influence on taxpayer's transfer pricing method;
  • explanation regarding accounting system, production process and decision making process;
  • explanation regarding competitors who have same or similar type of activity or business or product with taxpayer, including explanation regarding competitor's characteristic and market share;
  • copy of taxpayer's deed of establishment and its amendments or alike;
  • copy of taxpayer's Income Tax Return and annual report for the last 3 (three) years; and

18. Prelodgement shall generally cover the discussion on:

  • The necessity of APA;
  • The scope of APA proposed by taxpayer;
  • The proposed transfer pricing method;
  • Possibility of APA formation which may include treaty partner;
  • Documentation and analysis made by taxpayer;
  • The length of time and tax year period which shall be covered in APA; and
  • Other relevant matters to APA formation and implementation

19. DGT’s experience is that discussion of these issues at a meeting is much speedier and more productive than correspondence. DGT is usually able to indicate at the conclusion of a prelodgement whether it will be prepared to consider an application for an APA. Provision of details of the proposed covered transactions, and any slide presentation intended to be given to DGT beforehand, will help make the prelodgement meeting as productive and informative as possible.

20. A prelodgement can best be evaluated where the identity of the business is known as DGT can’t make any commitment over acceptance into the APA until the identity of the business is known.

21. In the event that DGT considers that an application shouldn’t be admitted into the APA, DGT will advise the taxpayer of the reasons why DGT takes that view. However, there is no right of admission as Prelodgement shall not bind DGT or the taxpayer to form APA.

Term of the agreement and ‘Roll-Back’

22. An APA will be operative for a specified period from the date of entry into force as set out in the agreement. The taxpayer should propose a term for the APA, taking into account the period over which it is reasonable to assume that the method for dealing with the relevant transfer pricing issues will remain appropriate. APA period can be granted for a maximum of 3 (three) tax years for unilateral APA, or for a maximum of 4 (four) tax years for bilateral APA.

23. An APA is intended to cover periods in advance of those where a return is already made at the date of application. However, it is possible that a fiscal year in APA period may have ended before agreement is reached. In that case, DGT may allow the APA to be effective for that year, and the agreement may set out any adjustments to be made for tax purposes as a consequence of the agreement.

24. The agreed transfer pricing methodology may be relevant for an earlier period (“Roll-back”), and to the resolution of any transfer pricing enquiries raised for earlier periods, if the particular facts and circumstances surrounding those years are substantially the same. Consequently, in such circumstances, the taxpayer may wish to consider requesting that the bilateral APA also covers this earlier period and is used as a basis for amending their self-assessment return for those years. The roll-back will be implemented via MAP, but this possibility is dependent on the ability and willingness of both administrations to roll-back.

25. Except where roll-back is being considered, the request for an APA in respect of future years won’t in itself affect any transfer pricing adjustment into earlier years. However, to the extent such an approach is appropriate and feasible, DGT will co-ordinate the APA request in respect of future years with any transfer pricing audit in respect of prior years in order to improve overall efficiency and reduce duplication of enquiries.

The formal APA application

26. Where, following DGT’s notification that it considers that prelodgement can be followed up to APA discussion stage and the taxpayer wishes to proceed, the taxpayer should submit a formal written application at the date not later than the end of tax year prior to the tax year covered in APA, or at a date explicitly agreed at the prelodgement. It is also encouraged that APA application be copied and sent to the tax office where taxpayer is registered.

27. The documents and information that should be incorporated in the formal application, are:

  • detailed explanation about the prelodgement results held previously between Director General of Taxes and Taxpayer;
  • detailed explanation about proposed Transfer Pricing method from taxpayer, including documentation which has been made by taxpayer;
  • detailed explanation about circumstances which may influence transfer pricing method;
  • detailed explanation and documentation which shall show that the implementation of transfer pricing method proposed by taxpayer has met arm’s length principle; and
  • detailed explanation about critical assumptions analysis; and
  • other required supporting documents.

28. In the case of a bilateral APA the taxpayer will be expected to ensure that all information provided in the application to one administration is made available at the same time to the other administration involved.

29. APA information is subject to the rules of confidentiality as stipulated under Article 34 of Law on General Provisions and Tax Procedures (Law No. 6 Year 1983). Information exchanged with treaty partners - for instance, in the course of reaching agreement on bilateral APAs - is also protected from disclosure by the terms of the Exchange of Information Article in the relevant DTA. Further, any information obtained during the APA process will not be used for tax audit purposes.

APA Discussion Stage

30. On receipt of an application DGT will evaluate its contents and will seek clarification and further information from the business as necessary. The examination of the application should be a co-operative process in which the transfer pricing issues are discussed openly and access to relevant supporting information and documentation is made available. Lack of co-operation in these respects may result in DGT declining to give any further consideration to the application.

31. Where a bilateral APA is being sought, DGT will expect the business to continue to make relevant information available at the same time to each administration involved, and in turn DGT will keep the treaty partner informed about the progress of its examination of the APA request, will seek to discuss with the treaty partner key issues arising at the earliest opportunity and will keep the business informed about the progress of the bilateral process.

32. Taxpayer will not attend the BAPA negotiation, unless both CAs mutually consent to allow the taxpayer to be present during the negotiation in order to explain the issues under discussion. Accordingly, finalising a bilateral agreement with a treaty partner is a government-to-government process.

Reaching agreement

33. The agreement between DGT and the taxpayer will be made subject to its terms being observed. The terms will include:>br>

  • a commitment from the taxpayer to demonstrate compliance to the agreed method for dealing with the transfer pricing issues during the term of the APA in the form of annual compliance report as required by Article 20 Paragraph (3) Minister of Finance Regulation No. 7/PMK.03/2015.
  • the identification of Critical Assumptions bearing materially on the reliability of the method and which, if subject to change, may render the agreement invalid.

34. The person responsible for signing the agreement on behalf of the taxpayer would be the person responsible for signing a tax return, subject to that person having authority to commit the taxpayer to the terms of the APA.

35. DGT endeavors to complete the APA discussion within 12 months from the acceptance of formal APA request, or in the case of bilateral APA, within the timeline stipulated in MAP regulation. This objective is dependent on the complexity of the case and, in the case of bilateral or multilateral applications, may be dependent on the working practice of the administration(s) in the other country or countries. It is also, of course, dependent on co-operation from the applicant. DGT may view significant delay on the part of the taxpayer as indicative of a lack of co-operation or a loss of interest in agreeing an APA and may then terminate the APA process as a result.

36. DGT expects the taxpayer to facilitate an efficient process by providing all the information necessary to consider the application properly and reach agreement in timely manner. This extends to the enterprise’s co-operation in ensuring that the formal APA agreement and any associated procedural paperwork are finalised shortly after the finalisation of the transfer pricing method and/or, in a bilateral or multilateral process, the concluding of agreements with treaty partner(s).

37. The tax administrations can’t give effect to, and the taxpayer can’t rely upon, the MAP APA reached between the Competent Authorities on its case unless, and until, the issuance of Director General of Taxes Decree stating the implementation of APA/MAP.

38. If agreement on the terms of an APA can’t be reached with the taxpayer, DGT will issue a formal letter to notify such disagreement. DGT doesn’t consider it has any obligation to continue discussion beyond the point at which it has determined that agreement can’t be reached.

39. DGT, and generally its treaty partners, will expect the actual pricing of the transactions covered by an APA to be consistent with the transfer pricing methodology and terms defined within it. Adjustments arising within the tax computation are expected to also be made in the accounts, thereby ensuring the economic and tax position of the arm’s length price is aligned.

APA monitoring and review - annual reports

40. The annual compliance report will generally accompany the business’s tax return, which is not later than 4 (four) months after the end of tax year. The report should be sent to the DGT office responsible for monitoring the APA, which is Directorate of International Taxation. Taxpayer may send the digital copy of annual compliance report to the email address: map@pajak.go.id. A copy may be sent to the Account Representative.

41. The requirements of each report will consist of

  • detailed explanation on Taxpayer compliance in implementing Transfer Pricing method on transactions covered in APA;
  • detailed explanation on the accuracy and consistency of the implementation of Transfer Pricing method;
  • detailed explanation on the accuracy of factors which may influence critical assumptions on the implementation of Transfer Pricing method;
  • detailed explanation that the tax return is in accordance with the APA; and
  • other information which supports explanation above.

 

42. The broad intention is that Annual Reports should demonstrate whether the business has complied with the terms and conditions of the APA.

APA Cancellation and Review

43. In accordance with Article 20 and 21 of Minister of Finance Regulation No. 7/PMK.03/2015, an APA may be reviewed or cancelled by DGT in accordance with its terms, where:

  • taxpayer does not comply with APA;
  • taxpayer submitted false data/information;
  • taxpayer does not submit annual compliance report in accordance with the provisions in Article 20 Paragraph (1) and Paragraph (2) MoF 7/PMK.03/2015;
  • taxpayer submits annual compliance report but does not fulfil the requirements as referred to in Article 20 Paragraph (3) MoF 7/PMK.03/2015;
  • there exist some changes in factors influencing critical assumption;
  • there is evidence that APA contains error; or
  • taxpayer is accused of tax crime.

44. In practice, when considering reviewing or cancelling the APA, DGT will consult with the taxpayer and with the Competent Authority of the treaty partner involved. Where a date of cancellation of the APA needs to be determined, it will be determined by the nature of the event that led to the cancellation.

Revising and renewing APAs

45. In some cases the APA may provide for revision of its terms in specific circumstances; for example, a particular agreement may provide that where there has been a change which makes the agreed methodology difficult to apply, but which doesn’t go as far as to invalidate a critical assumption, the agreement may be modified with the consent of the parties to resolve that difficulty. In such cases the APA may be revised in accordance with Article 21 of MoF 7/PMK.03/2015 after consultations between the taxpayer and DGT and, in the case of bilateral agreements, the Competent Authority of the other country involved.

46. The taxpayer may request renewal of an APA for an additional fixed period no later than 6 months preceding the expiry of its current term. Renewal will be processed similarly to ‘regular’ APA request, but the process should be lighter since DGT has already obtained the substantial information from previous APA as long as there is no substantial changes on facts and circumstances. DGT will consider interest in a renewal in light of current international thinking and DGT’s practice at the time. It will also consider whether the previous APA methodology and its monitoring requirements for all parties have functioned as well as intended.

 

Mutual Agreement Procedure (MAP)


Introduction

1. This MAP Guidance describes the Indonesia’s practice in relation to procedures for preventing or resolving taxation not in accordance with the provisions of tax treaty.
Indonesia has made efforts to strengthen the efficiency and effectiveness of the dispute resolution process and minimise incidences of unintended double taxation in light of recent experience and developments, in particular Action 14 “Making Dispute Resolution more Effective” (the Action 14 Report) of the Base Erosion Profit Shifting (BEPS) project. Indonesia has committed to implementing the minimum standard in respect of:

  • preventing disputes
  • availability and access to MAP
  • resolution of MAP cases
  • implementation of MAP agreements

2. The MAP Guidance outlines the MAP process and the use of MAP under the relevant Indonesia Double Taxation Agreements.

3.This MAP Guidance should be read in conjunction with Minister of Finance Regulation No.49/PMK.03/2019 concerning The Implementation Guidelines of Mutual Agreement Procedures.

Definition of MAP

4. Mutual Agreement Procedure, hereinafter referred to as “MAP”, is an administrative procedure which is stipulated in the Tax Treaty to resolve issues arising from the application of Tax Treaty, including transfer pricing issues.

The aim of MAP

5. A MAP request can be made when a person considers that the actions of one or both countries’ tax administrations result or will result in taxation not in accordance with the relevant tax treaty. The person may request Competent Authority (CA) assistance under the MAP.
The treaties require that the taxpayer presents his case to the CA of which he is a resident or, if his case comes under non-discrimination provisions, to that of the CA of which he is a national.

Eligibility for MAP

Who can request for MAP

6. MAP can be requested by:

  • Indonesian Taxpayer;
  • Indonesian Citizen;
  • Director General of Taxes; or
  • Competent Authority of Treaty Partner.

7. In this guidance, the term ‘Applicant’ refers to ‘Indonesian Taxpayer’ and ‘Indonesian Citizen’.

What can be requested for MAP?

8. Indonesian Taxpayer may request for MAP to Director General of Taxes if it considers there is a taxation not in accordance with the provision of the tax treaty, i.e.:

  1. taxation by tax administration of treaty partner resulting in double taxation due to:
    1. transfer pricing adjustment;
    2. adjustment related to the existence and/or to the attribution of profit of Permanent Establishment;
    3. adjustment on other taxable profits;
  2. withholding tax in the country/jurisdiction of treaty partner which is considered not in accordance with the provisions of tax treaty;
  3. determination the status as resident taxpayer by tax administration of treaty partner (dual resident issue);
  4. discrimination of tax treatment in the country/jurisdiction of treaty partner;
  5. interpretation of tax treaty provision.

9. Indonesian Citizen may request for MAP through Director General of Taxes only on any discriminations in the country/jurisdiction of treaty partner which is considered not in accordance with the non-discrimination provisions of tax treaty.

10. Director General of Taxes may request for MAP on the following issues:

  1. preventing double taxation as a result of transfer pricing adjustment initiated by Director General of Taxes by proposing any corresponding adjustment on taxable profit of treaty partner’s taxpayer;
  2. following-up Bilateral Advance Pricing Agreement (BAPA) application of Indonesian taxpayer, including the application of roll-back for the preceding years as referred to in the regulation concerning Advance Pricing Agreement;
  3. interpreting the provisions of tax treaty.

11. The material can be requested for MAP by the Competent Authority of treaty partner is not regulated under Ministry of Finance Regulation No. 49/PMK.03/2019.

Could MAP be requested in parallel with Domestic Remedy?

12. MAP initiated by Director General of Taxes and the Competent Authority of treaty partner can be requested in parallel with:

  • Request of Objection by Indonesian Taxpayer as referred to in Article 25 of Law on General Provisions and Tax Procedures (Law No. 6 Year 1983);
  • Request of Appeal by Indonesian Taxpayer as referred to in Article 27 of Law on General Provisions and Tax Procedures (Law No. 6 Year 1983); or
  • Request of Deduction or Cancellation of Incorrect Notice of Tax Assessment by Indonesian Taxpayer as referred to in Article 36 Paragraph (1) Sub-paragraph b of Law on General Provisions and Tax Procedures (Law No. 6 Year 1983);

 

13. Please be advised that if MAP is requested in parallel with the domestic remedies as referred to in Paragraph 12, the dispute requested in MAP shall also be covered in the above-said domestic remedies.

Rejection of MAP requests

14. In cases where it appears to the Indonesian CA that the taxpayer’s MAP request may be inadmissible or not justified, Indonesian CA will write to the other CA setting out the reasons why Indonesian CA believes the request is invalid and invite the other CA to provide its views before deciding to reject the request.

The Mechanisms of MAP Request

Where to submit MAP Request?

15. MAP requested by Indonesian Taxpayer shall be submitted to Director General of Taxes through District Tax Office where the Indonesian Taxpayer is administered.

16. MAP requested by Indonesian Citizen or Competent Authority of Treaty Partner shall be submitted to Director General of Taxes through Director of International Taxation.

What is the requirement to submit MAP request?

17. MAP requested by the Applicant shall satisfy the following requirements:

  1. the request shall be written in Bahasa Indonesia;
  2. the request shall describe the actions considered not in accordance with the provision of tax treaty according to the applicant (Indonesian taxpayer or Indonesian Citizen);
  3. the request shall be submitted within the timeframe as set out in the tax treaty, otherwise within 3 years at the latest.
  4. the request shall be signed by the Applicant or its representatives as referred to in Article 32 paragraph (1) of Law on General Provisions and Tax Procedures
  5. the request shall be supported with the following documents:
    1. certificate of domicile or any other document containing the identity of the taxpayer of treaty partner related to MAP request on the issue of paragraph 7 a. (double taxation) and 7 b. (withholding tax) above.
    2. lists of information and/or evidence pointing out that there is taxation not in accordance with the provision of treaty.
    3. statement letter declaring the willingness of the applicant to provide information completely and timely.

 

18. Please be advised that the form of MAP request is provided in the Annex A.1. (for Indonesian Taxpayer) and Annex A.2. (for Indonesian Citizen) of Minister of Finance Regulation No. 49/PMK.09/2019.

What is the time limit to submit MAP request?

19. MAP request shall be submitted within the time limit as stipulated in the tax treaty. Please be advised to check the pertinent tax treaty, since the provisions regarding time limit may vary for each tax treaty. However, if the tax treaty doesn’t set out the timeframe, MAP request shall be submitted within three years, started from:

  1. the date of Notice of Tax Assessment;
  2. the date of payment or withholding tax slip
  3. the date of taxation not in accordance with the provision of tax treaty

 

The Mechanisms of MAP Resolution

Formal review

20. After reviewing (i) the fulfillment of requirement as set forth in paragraph 15 to 17 above, and (ii) the adherence of material requested for MAP with material eligible for MAP request, Director General of Taxes determines whether the said MAP request is admissible.

21. In respect of the MAP request from the Applicant, Director General of Taxes will issue:

  1. written notification to the Applicant that MAP request is admissible and written request to the Competent Authority of treaty partner, in case the MAP request fulfills the formal requirement and material adherence; or
  2. rejection letter to the Applicant describing the reason of such rejection, in case the MAP request doesn’t fulfill the formal requirement and/or the material adherence;

within one month since the acceptance of MAP request.

22. In respect of the MAP request from the Competent Authority of treaty partner, Director General of Taxes will issue:

  1. written notification to the Competent Authority of treaty partner and the related Indonesian Taxpayer that MAP request is admissible, in case the MAP request fulfills the formal requirement (for instance, the requirement to submit MAP request within the timeframe set out in the pertinent tax treaty);
  2. rejection letter describing the reason thereof, in case the MAP request doesn’t fulfill the formal requirement (for instance, the inability to fulfill requirement to submit MAP request within the timeframe set out in the pertinent tax treaty)

within one month since the acceptance of MAP request.

23. In case when the one month time frame as set out in paragraphs 21-22 above has expired and Director General of Taxes has not issued any written notification, the said MAP request is deemed admissible.

24. In respect of the MAP request initiated by Director General of Taxes, Director General of Taxes will issue:

  1. written MAP request to the Competent Authority of treaty partner; and
  2. written notification to the related Indonesian Taxpayer.

25. In case where the MAP request to the Competent Authority of treaty partner is not responded by the Competent Authority of treaty partner within the time frame of 8 (eight) months since the date of such request, Director General of Taxes will issue written notification to:

  1. the Applicant that the MAP request is unable to follow-up; and
  2. the Competent Authority of treaty partner that MAP request is withdrawn.

MAP Discussion

Discussions Period

26. MAP discussion shall be carried out within the period of twenty four months, starting from:

  1. the acceptance of MAP request from the Competent Authority of treaty partner, for MAP initiated by the Competent Authority of treaty partner; or
  2. the request for MAP to the Competent Authority of treaty partner, for MAP initiated either by the Applicant or by Director General of Taxes.

MAP Outcome

27. The outcome of MAP discussion may be in the form of agreement or disagreement over the material requested for MAP.

28. The disagreement may occur in the following conditions:

  1. the discussion ends with mutual agreement for disagreement;
  2. the discussion hasn’t reached any agreement until the 24 (twenty four) months period expires;
  3. the discussion is carried out simultaneously with the appeal process and until the appeal decision is being publicly pronounced, the discussion hasn’t reached any agreement;
  4. the domestic time limit for the relevant fiscal year, part of fiscal year or fiscal period covered in MAP request has expired and the MAP discussion hasn’t reached any agreement;
  5. the Indonesian taxpayer participates in tax amnesty program for the fiscal year, part of fiscal year or fiscal period covered in the MAP request.

Applicant’s Obligation during MAP Discussion

29. The Applicant shall provide any information and/or evidence to Director General of Taxes through Director of International Taxation in hardcopy or softcopy no later than 2 (two) months after:

  1. the date of written notification that MAP request is admissible; or
  2. the expiry date of one month period as referred to in paragraph 22 above such that MAP request is deemed admissible.

Implementing the MAP outcome

30. Director General of Taxes follows up the MAP outcome by issuing Decree of Director General within one month since:

  1. the acceptance of written notification from the Competent Authority of treaty partner that Mutual Agreement is implementable; and
  2. the delivery of written notification to the Competent Authority of treaty partner that Mutual Agreement is implementable.

Scope for granting relief

31. In the event of Indonesian CA concludes that an action has led to taxation not in accordance with the provision of tax treaty (and that the MAP request is admissible and justified) then the Indonesian CA will first consider if the issue can be resolved on a unilateral basis. In this case, Indonesian CA may grant relief, under the provisions of the treaty, without the need to enter into bilateral discussion with the other tax authority.

32. In the event Indonesian CA can’t resolve the issue unilaterally, then Indonesian CA will take up the matter with the CA of treaty partner. If discussions between the CAs provide adequate evidence to satisfy the Indonesian CA that an adjustment made by the other tax authority is in accordance with the tax treaty, say for instance it was required in order to comply with the arm’s length principle, the Indonesian CA will grant a corresponding adjustment.

In the event the CAs can establish that the primary adjustment was excessive (a nonarm’s length amount), they will agree a course whereby the primary adjustment is reduced and the remaining adjustment is relieved in an amount that reflects an arm’s length result. In case, however, the Indonesian CA remains dissatisfied, there’s no obligation on it to grant relief.

Methods of giving relief

34. As stipulated in the relevant Tax Treaty, any agreement reached during MAP will be implemented notwithstanding any time limits in the domestic laws.

35. Relief may be granted through recalculating the tax payable, for instance by amending the Notice of Tax Assessment; amending the Objection Decision; amending the Deduction or Cancellation of Incorrect Notice of Tax Assessment; or refunding the tax should not have been payable (in case of withholding tax).

MAP Withdrawal Request

36. MAP withdrawal can be requested by:

  1. Indonesian Taxpayer
  2. Indonesian Citizen
  3. Director General of Taxes
  4. Competent Authority of treaty partner

37. The request of MAP withdrawal submitted by the Applicant shall fulfill the following requirements:

  1. the request shall be written in Bahasa Indonesia;
  2. the request shall be submitted no later than six months since the commencement of the discussion;
  3. the request shall describe the reason of withdrawal; and
  4. the request shall be signed by the Applicant or the representative as referred to in Article 32 Paragraph (1) of Law on General Provisions and Tax Procedures

Position on MAP Arbitration

38. Indonesia has no domestic mechanism for applying arbitration procedures in relation to the MAP process, other than for the one treaty with Mexico. Indonesia further specified that its treaty policy is not to include a mandatory and binding arbitration provision in its bilateral tax treaties. In this respect, in the Commentary of non-members to the 2017 OECD Model Tax Convention, Indonesia reserved the right not to include paragraph 5 of Article 25 in its tax treaties.

APA and MAP Statistics

39. We provide the Indonesia APA and Statistics as shown below:

Year

Item

UAPA

BAPA

MAP

Total

Pre-2016

Requested

3

10

72

85

Closed

0

0

1

0

Ending Balance

3

10

71

84

2016

Beginning Balance

3

10

71

84

Requested

11

13

20

44

Closed

0

3

37

40

Ending Balance

14

20

54

88

2017

Beginning Balance

14

20

54

88

Requested

2

2

18

22

Closed

1

2

19

22

Ending Balance

15

20

53

88

2018

Beginning Balance

15

20

53

88

Requested

0

10

27

37

Closed

11

3

22

36

Ending Balance

4

27

58

89

2019

Beginning Balance

4

27

58

89

Requested

3

11

8

22

Closed

4

9

11

24

Ending Balance

3

29

55

87


Source: Directorate of International Taxation Inventory Case Database

 

Indonesian CA contacts

40. Requests for more information and for access to MAP and APA should be directed to the designated Indonesian CA:
Director of International Taxation,
Directorate General of Taxes,
JI. Jenderal Gatot Subroto 40-42 Jakarta 12190
Phone +62 21 5250208, 5262880, 5251609 ext. 51110,
Fax +62 21 5732064
email: map@pajak.go.id

41. For the purpose of communication between CAs, DGT is able to conduct the communication via face to face meeting, call conference, video conference, facsimile, and email. DGT prefers to use email with encrypted attachment for exchanging information as well as position for MAP purposes. For security and confidentiality reasons, instead of mentioning the full identity of the taxpayer, please be advised to use the initial thereof. The email should be addressed to the aforementioned dedicated email: map@pajak.go.id with cc to the contact information of Indonesian CA Team as follow.

42. The contact information of Indonesian CA Team:

Name Position Region Email
P.M. John L. Hutagaol Competent Authority (Director of International Taxation) Worldwide poltak.hutagaol@pajak.go.id
Dwi Astuti Deputy Director of International Taxation for Dispute Prevention and Settlement Worldwide dwiastuti3@pajak.go.id
Aji Witono Section Chief for International Taxation Dispute Prevention and Settlement I Asian Countries (excluding Japan, South Korea, and China), Australia, New Zealand and Pacific Countries aji.witono@pajak.go.id
Edi Sihar Tambunan Section Chief for International Taxation Dispute Prevention and Settlement II Japan, United States, Canada, and South American Countries edi.tambunan@pajak.go.id
Andik Kusbiantoro Section Chief for International Taxation Dispute Prevention and Settlement III South Korea, China and other Asian Countries (Non-ASEAN) andik.kusbiantoro@pajak.go.id
Ivan Sandy Section Chief for International Taxation Dispute Prevention and Settlement IV European Countries and African Countries ivan.sandyst@pajak.go.id