Request for the APA

• Indonesian Taxpayer may apply for an APA to Director General of Taxes concerning a Affiliated Transaction based on:

1. Taxpayer's initiative, in the form of Unilateral APA, Bilateral APA, or Multilateral APA; or
2. Written notification from the Director General of Taxes in relation to a Bilateral APA or Multilateral APA request that filed by a non-resident tax subject to the Competent Authority of the Tax Treaty Partner

• A Bilateral APA request that filed by a non-resident tax subject to the Competent Authority of the Tax Treaty Partner will not proceed to the next stage if the Indonesian Taxpayer does not similarly request for APA.
• APA consists of agreements upon:

1. Transfer Pricing criteria; and
2. Determination of the Transfer Price in advance for the APA Period and Roll-Back (in the event that the Taxpayer requested Roll-back in its APA request.)

• The afore-mentioned criteria contain at least:

1. the identity of the Affiliated Party covered in the APA;
2. the affiliated transaction covered in the APA;
3. the Transfer Pricing Method agreed;
4. how to implement the transfer pricing method agreed; and
5. the critical assumptions that influence the transfer pricing (written and non-written contractual terms; functions-assets-risks of each party; characteristic of the transaction and characteristic of each party; and economic conditions that influence the transfer pricing).

• APAs will not be declined solely based on the size of the transactions giving rise to the transfer pricing issues. However, Indonesian Taxpayer must meet the following criteria to submit an APA request:

1. it has fulfilled the obligation to submit the Annual Corporate Income Tax Return for 3 (three) taxable years prior to the fiscal year when the APA request is filed;
2. it has been required and fulfilled the obligation to produce and keep Transfer Pricing Documentation (master file and local file) for 3 (three) fiscal years prior to the fiscal year when the APA request is filed; 
3. it is not currently under investigation for tax crime or currently under penalty for tax crime;
4. the Affiliated Party and Affiliated Transactions requested to be included in the APA request have been reported by the Taxpayer in its Annual Corporate Income Tax Returns as referred to in point a; and
5. the requested Transfer Pricing in the APA application is based on the arm's length principle and does not result in Taxpayer's operating profit being smaller than the operating profits as reported in the Annual Corporate Income Tax Returns as referred to in point a. 
6. The requirement regarding the operating profit is considered fulfilled insofar as the lowest operating profit within the APA period as projected in the APA request is higher than the lowest operating profit within the last 3 (three) fiscal years prior to the fiscal year when the APA application is submitted. 
7. The term operating profit, as referred to in these regulations, is the ratio between profit before tax or net commercial income with total revenue or the ratio between profit before tax or net commercial income with total expenses.

INITIAL STAGE

• As per the PMK-172/2023, there is no longer a pre-lodgement process.
• Indonesian Taxpayer wishing to request for APA must submit the request through the Tax Office where the Taxpayer is registered. It is advisable that the Taxpayer also sends a softcopy of their APA request to map@pajak.go.id and communicate to the Indonesian CA Contacts found below. The Taxpayer should also make their Account Representative aware of their interest in an APA and send them a copy of the correspondence. 
• The APA request must be submitted by filling in the APA application form as attached in Annex of PMK-172/2023 correctly, completely, and clearly. The form then must be signed by the management whose name is listed in the company’s deed of establishment or deed of the amendment.
• The APA request must be filed within 12 (twelve) months up to 6 (six) months prior to the starting of the APA Period.
• The APA request must be enclosed with: 

1. a statement that the Taxpayer is willing to complete all the documents required within the APA process; and
2. a statement that the Taxpayer is willing to implement the APA agreement.

• DGT will review the request and subsequently issue a written notice to the Taxpayer (and the corresponding Treaty Partner, in case of Bilateral APA) whether the request can be processed or not. The notice will be issued within 1 (one) month after the date of receipt. If this period is exceeded and the written notification has not been issued, the request is deemed processable
• The Taxpayer whose APA request is accepted will be required to complete its application by filing:  

1. the financial statements audited by a public accountant for the last 3 (three) fiscal years prior to the fiscal year when the APA request is submitted;   
2. Transfer Pricing Documentation for the last 3 (three) fiscal years prior to the fiscal year when the APA request is submitted; and
3. the document containing a detailed explanation of the application of the arm's length principle for each Affiliated Transaction proposed to be included in APA in Bahasa Indonesia (Annex B of PMK-172/2023). 

• In the case of Bilateral APA, the Taxpayer will be expected to ensure that all information provided in the request to one administration is made available at the same time to the other administration involved.

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 of 1983). Information exchanged with treaty partners - for instance, in the course of reaching an 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.