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
1. Directorate General of Taxes (DGT) has established the Advance Pricing Agreement (APA) program in Indonesia since 2010 to assist the Taxpayers in determining their transfer pricing policy for the controlled transactions and to prevent the potential transfer pricing disputes in the future that may otherwise result in a Mutual Agreement Procedure (MAP).
2. This APA Guidance is expected as general guidance for the Taxpayers as well as our Treaty Partners intended to enter into the APA program. Accordingly, it should be read in conjunction with the Minister of Finance Regulation Number PMK-22/PMK.03/2020 on The Procedures for Advance Pricing Agreement and its implementing regulation in the form of Director-General Regulation Number PER-17/PJ/2020.
DEFINITION
3. An APA is a written agreement made between:
a. Director-General of Taxes and the Taxpayer; or
b. Director-General of Taxes and the Competent Authority of the Treaty Partner that involves the related Taxpayers,
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 the arm's length price or arm's length profit in advance.
OBJECTIVES OF APA
4. Due to potential 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 occur, rather than retrospectively years later when, for example, the key personnel in the business may have moved on.
5. An APA helps prevent potential disputes on transfer pricing issues that could be arisen in the future.
6. 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.
7. DGT does not levy any charge on the business for their assistance during the APA
program. All services provided by DGT during the APA process are free of charge.
UNILATERAL APA (UAPA) OR BILATERAL APA (BAPA)
8. A binding agreement between an Indonesian taxpayer and DGT is referred to in Article 1
Number 9 of PMK 22/2020 as a Unilateral APA. Although this agreement confirms the tax treatment in Indonesia, it does not determine how the issues are to be resolved in any other jurisdictions involved. Consequently, it does not 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 related jurisdiction containing a MAP article, the Taxpayer may request for Bilateral APA in accordance with Article 2 Section (1) of MoF Regulation Number 22/PMK.03/2020 (PMK-22/2020).
9. The choice between Unilateral APA and Bilateral APA depends on the Taxpayer's preference taking into account the availability of the APA program in the treaty partner's domestic legislation.
APA APPLICATION
10. Indonesian Taxpayer may apply for an APA to Director General of Taxes concerning a
Controlled Transaction based on:
a. Taxpayer's initiative, in the form of Unilateral APA or Bilateral APA; or
b. Written notification from the Director-General of Taxes in relation to a Bilateral APA application requested by a non-resident taxpayer to the Competent Authority of Treaty Partner
11. A Bilateral APA application requested by a non-resident taxpayer to the Competent Authority of Treaty Partner will not proceed to the next stage if the Indonesian Taxpayer does not similarly request for APA.
12. APA consists of agreements upon:
• Transfer Pricing criteria; and
• 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 application.) The aforementioned criteria contain at least:
• the identity of the Related Party covered in the APA;
• the controlled transaction covered in the APA;
• the Transfer Pricing Method applied;
• how to apply the transfer pricing method agreed; and
• 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).
13. APAs will not be declined solely by reference to the size of the transactions giving rise to the transfer pricing issues. However, due regard must be had that Indonesian Taxpayer may submit APA applications insofar as:
a. it has fulfilled the obligation to submit the Annual Corporate Income Tax Return for 3 (three) taxable years prior to the taxable year when the APA application is submitted;
b. it has been required and fulfilled the obligation to produce and keep Transfer Pricing Documentation (master file and local file) for 3 (three) taxable years prior to the taxable year when the APA application is submitted;
c. it is not currently under investigation for tax crime or currently under penalty for tax crime; d. the Related Party and Controlled Transactions proposed to be included in the APA application have been reported by the Taxpayer in its Annual Corporate Income Tax
Returns as referred to in point a; and
e. the proposed 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.
14. Pursuant to Article 3 of PER-17/PJ/2020, the requirement regarding the operating profit, as referred to in Paragraph 13 letter e above, is considered fulfilled in so far as the lowest operating profit within the APA period as projected in the APA application is higher than the lowest operating profit within the last 3 (three) taxable years prior to the taxable year when the APA application is submitted.
15. 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
16. As per the PMK-22/2020, there is no longer a pre-lodgement process.
17. Indonesian Taxpayer wishing to request for APA must submit the application 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.
18. The APA application must be submitted by filling in the APA application form as attached in Annex A of PMK-22/2020 correctly, completely, and clearly. The form then must be signed by the management whose name is listed in the deed of establishment or deed of the amendment.
19. The APA application must be submitted within 12 (twelve) months up to 6 (six) months prior to the starting of the APA Period.
20. The APA application must be enclosed with:
a. a statement that the Taxpayer is willing to complete all the documents required within the APA process; and
b. a statement that the Taxpayer is willing to implement the APA agreement.
21. DGT will assess the application and subsequently issue a written notice to the Taxpayer (and the corresponding Treaty Partner, in case of Bilateral APA) whether the application 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 notice has not been issued, the application is deemed processable.
22. The Taxpayer whose APA application is accepted will be required to complete its application by filing:
• the financial statements audited by a public accountant for the last 3 (three) taxable years prior to the taxable year when the APA application is submitted;
• Transfer Pricing Documentation for the last 3 (three) taxable years prior to the taxable year when the APA application is submitted; and
• the document containing a detailed explanation of the application of the arm's length principle for each Controlled Transaction proposed to be included in APA in Bahasa
Indonesia (Annex B of PMK-22/2020).
23. In the case of 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.
24. 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.
APA PERIOD AND ROLL-BACK
25. 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
5 (five) fiscal years for both Unilateral and Bilateral APA.
26. 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 the APA period may have ended before an agreement is reached. In that case, DGT may allow the APA to be effective for that year, and the agreement may set out any transfer pricing adjustments to be made for tax purposes as a consequence of the agreement.
27. PMK-22/2020 allows the agreed transfer pricing methodology to be applied for an earlier period (Roll-back) insofar as:
a. the facts and circumstances of the controlled transactions do not differ materially from the facts and circumstances of the controlled transactions within the APA Period;
b. the statute of limitation for the transaction agreed for tax assessment has not been surpassed;
c. no Notice of Tax Assessment for Corporate Income Tax has been issued; and
d. no criminal investigation is being conducted, nor criminal punishment is being served.
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.
28. Taxpayers requesting roll-back may expect DGT to carry out an audit for other purposes in accordance with the provisions of the legislation on taxation.
29. 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.
APA DISCUSSION
30. On receipt of an application, DGT shall:
a. carry out an assessment to the Taxpayer concerning the Taxpayer's APA application;
b. visit the place of business of the Taxpayer and/or Taxpayer's Related Party;
c. interview the management and/or employee of the Taxpayer;
d. ask for the Taxpayer to provide additional data and/or information in the form of evidence, whether in the form of document or statement;
e. ask for the Related Party or other parties concerned to provide data and/or information in the form of evidence, whether in the form of a document or statement
31. The examination of the application should be a cooperative process in which the transfer pricing issues are discussed openly and access to relevant supporting information and documentation is made available. The Taxpayer shall provide information that is known (or should be known) by Taxpayer to DGT that may affect the outcome of the agreement in APA without having to wait for a request from DGT. Lack of co-operation in these respects may result in DGT declining to give any further consideration to the application.
32. 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 Taxpayer informed about the progress of the bilateral process.
33. For Unilateral APA, the negotiation shall start no later than 6 (six) months since the Indonesian Taxpayer submitted the completed APA application within the period as referred to in Article 6 section (5) and concluded within 12 (twelve) months period since the starting of the APA negotiation.
34. Bilateral APA is governed by MAP protocol. The Taxpayer will not attend the BAPA negotiation unless on the rare situation where 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 Competent Authority-to- Competent Authority process.
APA DECISION
35. DGT may disagree on the APA application in cases of, for instance:
a. the Controlled Transaction is not based on the economic purpose;
b. the economic substance of the Controlled Transaction is different from its form;
c. the Controlled Transaction is conducted with one of its purposes is to minimalise the tax;
d. the information and/or evidence or statement submitted by the tax resident of
Indonesia is not true or not in accordance with the actual condition;
e. DGT cannot obtain the information and/or evidence or statement within 14 days since the date of a written request; and/or
f. (for the taxable year contained within the APA Period or the Roll-back) the taxable year has been issued Notice of Tax Assessment of Corporate Income Tax thereof.
36. The person responsible for signing the agreement on behalf of the Taxpayer would be the person responsible for signing its tax return, subject to that person having Authority to commit the Taxpayer to the terms of the APA.
37. DGT shall endeavour to complete the APA discussion within 12 months from the acceptance of the APA request (for Unilateral APA). In the case of Bilateral APA, within the timeline stipulated in the MAP regulation. This objective is dependent on the complexity of the case and, in the case of bilateral and 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 with an APA and may then discontinue the APA process as a result.
38. DGT expects the Taxpayer to facilitate an efficient process by providing all the information necessary to consider the application properly and reach an agreement in a timely manner. This extends to the enterprise's co-operation in ensuring that the formal 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 conclusion of agreements with treaty partner(s).
39. The tax administrations cannot give effect to, and the Taxpayer cannot rely upon, the APA reached between DGT and the Taxpayer (for Unilateral APA) or DGT and the Treaty Partner Competent Authorities (for Bilateral APA) unless, and until, the issuance of Director General of Taxes Decree stating the implementation of APA/MAP.
40. If agreement on the terms of an APA cannot be reached with the Taxpayer, DGT will issue a formal letter to notify such disagreement. DGT does not consider it has any obligation to continue the discussion beyond the point at which it has determined that agreement cannot be reached.
41. Indonesian Taxpayer may file a request for Unilateral APA negotiation in the event that:
a. The Bilateral APA negotiation resulted in disagreement; or
b. The Bilateral APA process is terminated because the Competent Authority of the
Treaty Partner did not submit any written answer.
42. The above-mentioned request for Unilateral APA negotiation must be submitted to the Director-General of Taxes through the Director of International Taxation no later than 10 (ten) working days since the date of the written notification that the Bilateral APA resulted in disagreement or termination.
43. 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 also expected to be made in the accounts, thereby ensuring the economic and tax position of the arm's length price is aligned.
APA COMPLIANCE
44. As per the PMK-22/2020, the annual compliance report is not necessarily be submitted as a separate document. The agreements contained in the APA as referred to in section (1) must be reflected in the Transfer Pricing policy of the Indonesian Taxpayer, and its implementation must be stated in the Transfer Pricing Documentations for the APA Period.
45. The transfer pricing documentation, which contains the implementation of the agreement, shall be available at the same time as the tax return, which is not later than 4 (four) months after the end of the Fiscal Year. It is advisable that Taxpayer send the digital copy to the email
address: map@pajak.go.id as well as another copy for the Account Representative.
46. The broad intention is that both the Annual Corporate Income Tax Return and the Transfer Pricing Documentation should demonstrate whether the Taxpayer has complied with the terms and conditions of the APA.
APA CANCELLATION AND REVIEW
47. In accordance with Articles 18 and 19 of PMK-22/2020, an APA may be evaluated by
DGT, and DGT is authorised to:
a. carry out an evaluation with the Taxpayer concerning the implementation of the agreement in APA;
b. ask for the Taxpayer to provide information and/or evidence or statement necessary;
c. visit the place of business of the Taxpayer and/or Taxpayer's related party;
d. interview the management and/or employee of the Taxpayer; and/or
e. to ask for information and/or evidence or statement from the related party or other parties concerned
48. Based on the evaluation, DGT is authorised to review or to cancel the APA.
49. In some cases, the APA may provide for review of its terms in specific circumstances, for example, a particular change in corporate structure or economic circumstances makes the agreed methodology difficult to apply. Consequently, 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 19 of PMK-22/2020, which is conducted by implementing the provisions as referred to in Article 6 (review the completeness and eligibility) to Article 15 (negotiation).
50. The Taxpayer may, if deemed necessary, request for a review. The request for APA review must be submitted directly to the Director-General of Taxes through the Director of International Taxation by filling correctly, completely, and clearly, the form as referred to in Attachment letter E in PMK-22/2020.
51. The result of the APA review negotiation will be set forth in the amendments to the Text or the Mutual Agreement.
52. As stated above, APA should be a cooperative process in which the transfer pricing issues are discussed openly, and access to relevant supporting information and documentation is made available. Upon the evaluation of APA, DGT, therefore, may cancel the agreement in the APA if the APA is ultimately known to be not made in good faith, for instance:
a. Taxpayer provides information and/or evidence or statement that is not true or not in
accordance with the actual conditions; and/or
b. The Taxpayer does not provide information/evidence/statement which is known (or should be known) by Taxpayer and may affect the outcome of the agreement to
DGT regardless of whether it is requested by DGT.
53. 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.
APA RENEWAL
54. In renegotiating agreements after a certain period ends as referred to in Article 3 section (2), the Taxpayer may submit an APA renewal request to the Director-General of Taxes through the Tax Office where Taxpayer is registered.
55. The request must be made within a period of 12 (twelve) months up to 6 (six) months before the last taxable year in the previous APA Period. The request is made by filling the APA renewal request form as referred to in Attachment letter F in the PMK-
22/2020 correctly, completely, and clearly.
56. The Taxpayer may request renewal of an APA for 1 (one) APA period. The renewal may be granted insofar as:
a. Taxpayer implements all agreements in the previous APA;
b. there is no material change to the facts and/or conditions of the controlled transactions covered in the previous APA with critical assumptions agreed in the previous APA; and
c. entities and the related party transaction proposed to be included in the APA renewal are the same as the previous APA.
57. Renewal will be processed similarly to regular APA requests, but the process should be lighter since DGT has already obtained substantial information from the previous APA as long as there are no substantial changes in facts and circumstances. As such, DGT does not assess the formal requirement (completeness and eligibility) and proceeds directly to material assessment.
IMPLICATIONS OF COVID-19 PANDEMIC
58. Article 3 Section (4) of PER-17/PJ/2020 stipulated that in the event the APA application is filed by the Taxpayer whose business is negatively affected by the COVID-19 pandemic, the operating profit projection in its APA application is adjusted from the normal condition by filling the form as attached in Annex A of this regulation.
59. If the business of the Taxpayer is negatively affected by the COVID-19 pandemic after an
APA agreement has been achieved, then the existing agreement can be reviewed by
DGT either on DGT's own initiative or based on the request filed by the Taxpayer.
60. During the period of the COVID-19 pandemic, the APA discussions between DGT and the Taxpayer or with the Competent Authority of the related Treaty Partner can be conducted virtually, utilizing a virtual meeting application, without compromising the confidentiality rules applicable.
MUTUAL AGREEMENT PROCEDURE (MAP)
INTRODUCTION
1. This MAP Guidance describes Indonesia's practice in relation to procedures for preventing or resolving taxation not in accordance with the provisions of the 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 Number 49/PMK.03/2019 concerning The Implementation Guidelines of Mutual Agreement Procedures and its implementing regulation in the form of Director-General Regulation Number PER-16/PJ/2020.
DEFINITION
4. Mutual Agreement Procedure, hereinafter referred to as MAP, is an administrative procedure that is stipulated in the Tax Treaty to resolve issues arising from the application of Tax Treaty, including transfer pricing issues.
OBJECTIVES 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:
• Tax Resident of Indonesia;
• Indonesian Citizen (for non-discrimination issues);
• Director-General of Taxes; or
• The Competent Authority of the Treaty Partner.
7. In this guidance, the term 'Applicant' refers to the Tax Resident of Indonesia and
Indonesian Citizen.
What can be requested for MAP?
8. Tax Resident of Indonesia may request for MAP to Director General of Taxes if it considers there is taxation not in accordance with the provision of the tax treaty, i.e.:
a. taxation by the 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;
b. withholding tax in the country/jurisdiction of treaty partner which is considered not in accordance with the provisions of a tax treaty;
c. determination the status as resident Taxpayer by the tax administration of treaty partner (dual resident issue);
d. discrimination of tax treatment in the country/jurisdiction of the treaty partner;
e. interpretation of tax treaty provision.
9. Indonesian Citizens may request for MAP through the 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 the tax treaty.
10. Director-General of Taxes may request for MAP, among others, for the following issues:
a. preventing double taxation as a result of transfer pricing adjustment initiated by Director General of Taxes by proposing any corresponding adjustment on the taxable profit of treaty partner's Taxpayer;
b. 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;
c. interpreting the provisions of the tax treaty.
How MAP interacts with the Domestic Remedies?
11. MAP initiated by Director General of Taxes and the Competent Authority of treaty partner can be requested in parallel with:
• The request of Objection by Indonesian Taxpayer as referred to in Article 25 of Law on General Provisions and Tax Procedures (Law No. 6 the Year 1983);
• The request of Appeal by Indonesian Taxpayer as referred to in Article 27 of Law on
General Provisions and Tax Procedures (Law No. 6 the Year 1983); or
• The 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 the Year 1983);
12. Please be advised that if MAP is requested in parallel with the Objection and Appeal, the dispute requested in MAP shall also be covered within the Objection and Appeal.
Rejection of MAP requests
13. In cases where it appears to the Indonesian CA that the Taxpayer's MAP request may be inadmissible or not justified, the Indonesian CA will write to the other CA setting out the reasons why the Indonesian CA believes the request is invalid and invite the other CA to provide its views before deciding to reject the request.
MAP APPLICATION
Where to file MAP requests?
14. MAP requested by the Indonesian Taxpayer shall be submitted to the Director-General of
Taxes through District Tax Office where the Indonesian Taxpayer is administered.
15. MAP requested by Indonesian Citizen (for non-discrimination issues) or Competent Authority of Treaty Partner shall be submitted to Director General of Taxes through Director of International Taxation.
What are the requirements?
16. MAP requested by the Applicant shall satisfy the following requirements:
a. the request shall be written in Bahasa Indonesia;
b. 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);
c. the request shall be submitted within the timeframe set out in the tax treaty, otherwise within 3 years at the latest.
d. 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 e. 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 8a. (double taxation) and 8b. (withholding tax) above.
2) lists of information and/or evidence pointing out that there is taxation not in accordance with the treaty's provision.
3) statement letter declaring the willingness of the Applicant to provide information completely and timely.
17. Please be advised that the MAP request form is provided in Annex A.1. (for Indonesian
Taxpayer) and Annex A.2. (for Indonesian Citizens) of Minister of Finance Regulation No.
49/PMK.09/2019.
The timeline for MAP Application
18. 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 the 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:
a. the date of Notice of Tax Assessment;
b. the date of payment or withholding tax slip;
c. the date of taxation not in accordance with the provision of tax treaty
MAP PROCESS
Formal Review
19. After reviewing (i) the fulfilment of requirement as set forth above, and (ii) the adherence of material requested for MAP with material eligible for MAP request, the Director-General of Taxes determines whether the said MAP request is admissible.
20. In respect of the MAP request from the Applicant, the Director-General of Taxes will issue: a. 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 fulfils the formal
requirement and material adherence; or
b. rejection letter to the Applicant describing the reason for such rejection, in case the
MAP request doesn't meet the formal requirement and/or the material adherence;
within one month since the acceptance of the MAP request.
21. In respect of the MAP request from the Competent Authority of treaty partner, Director
General of Taxes will issue:
a. written notification to the Competent Authority of treaty partner and the related Indonesian Taxpayer that MAP request is admissible, in case the MAP request fulfils the formal requirement (for instance, the requirement to submit MAP request within the timeframe set out in the pertinent tax treaty); or
b. rejection letter describing the reason thereof, in case the MAP request doesn't fulfil the formal requirement (for instance, the inability to meet the requirement to submit MAP request within the timeframe set out in the pertinent tax treaty) within
one month since the acceptance of the MAP request.
22. In case when the one-month time frame as set out in paragraphs 20 and 21 above has expired and the Director-General of Taxes has not issued any written notification, the said MAP request is deemed admissible.
23. In respect of the MAP request initiated by the Director-General of Taxes, the Director
General of Taxes will issue:
a. written MAP request to the Competent Authority of the treaty partner; and b. written notification to the related Indonesian Taxpayer.
24. In the 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:
a. the Applicant that the MAP request is unable to follow-up; and
b. the Competent Authority of treaty partner that MAP request is withdrawn.
MAP DISCUSSION
Discussion Period
25. Indonesia’s Competent Authority is authorized to conduct the discussion within twenty four months, starting from:
a. The acceptance of MAP request from the Competent Authority of treaty partner, for
MAP initiated by the Competent Authority of the treaty partner; or
b. The request for MAP to the Competent Authority of the treaty partner for MAP, initiated either by the Applicant or by the Director-General of Taxes.
MAP Outcome
26. The outcome of MAP discussion may be in the form of agreement or disagreement over the material requested for MAP.
27. The disagreement may occur in the following conditions:
a. the discussion ends with mutual agreement for disagreement;
b. the discussion hasn't reached any agreement until the 24 (twenty-four) months period expires (especially when Indonesia’s Competent Authority and the treaty partner’s competent authority is of the view that further endeavours may not be justified for the case at hand);
c. 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;
d. the domestic time limit for the relevant fiscal year, part of the fiscal year or the fiscal period covered in MAP request has expired, and the MAP discussion hasn't reached any agreement (especially where the relevant tax treaty does not contain equivalent provision of the second sentence of Article 25(2) of the OECD Model Tax Convention (OECD, 2017) which could possibly prevent the implementation of a MAP agreement, Indonesia’s Competent Authority would for clarity and transparency purposes will notify the treaty partner’s Competent Authority in timely manner. However, this situation is very limited and remote to actually happen);
e. the Indonesian Taxpayer participates in the tax amnesty program for the fiscal year, part of the fiscal year, or the fiscal period covered in the MAP request.
The Applicant's Obligations during MAP Discussion
28. 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:
a. the date of written notification that MAP request is admissible, or
b. the expiry date of one month period as referred to in paragraph 21 above such that
MAP request is deemed admissible.
IMPLEMENTING THE MAP OUTCOME
29. Director-General of Taxes follows up the MAP outcome by issuing Decree of
DirectorGeneral within one month since:
a. the acceptance of written notification from the Competent Authority of treaty partner that Mutual Agreement is implementable; and
b. the delivery of the written notification to the Competent Authority of the treaty partner that the Mutual Agreement is implementable.
Scope for Granting Relief
30. In the event that the Indonesian CA concludes that an action has led to taxation not in accordance with the provision of the tax treaty (and that the MAP request is admissible and justified), the Indonesian CA will first consider if the issue can be resolved on a unilateral basis. In this case, the Indonesian CA may grant relief, under the treaty's provisions, without the need to enter into a bilateral discussion with the other tax authority.
31. In the event that the Indonesian CA cannot resolve the issue unilaterally, then Indonesian CA will take up the matter with the CA of the 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, for instance, it was required in order to comply with the arm's length principle, the Indonesian CA will grant a corresponding adjustment.
32. In the event that the CAs can establish that the primary adjustment was excessive (a non- arm's length amount), they will agree to 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 for Granting Relief
33. As stipulated in the relevant Tax Treaty, any agreement reached during MAP will be implemented notwithstanding any time limits in the domestic laws.
34. 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
35. MAP withdrawal can be requested by:
a. Indonesian Taxpayer
b. Indonesian Citizen
c. Director-General of Taxes
d. Competent Authority of the treaty partner
36. The request of MAP withdrawal submitted by the Applicant shall fulfil the following requirements:
a. the request shall be written in Bahasa Indonesia;
b. the request shall be submitted no later than six months since the commencement of the discussion;
c. the request shall describe the reason of withdrawal; and
d. 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
37. 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. Also, Indonesia has put consistent reservation on Multilateral Convention To Implement Tax Treaty Related Measures To Prevent Base Erosion And Profit Shifting (MLI) with regard the arbitration.
APA AND MAP STATISTICS
38. We provide the Indonesia APA and MAP and Statistics as shown below:
| PERIOD | ITEM | MAP | UAPA | BAPA | TOTAL |
| Pre-2016 | Applications received | 73 | 3 | 10 | 86 |
| Applications closed | 1 | 0 | 0 | 1 | |
| Ending balance | 72 | 3 | 10 | 85 | |
| 2016 | Beginning balance | 72 | 3 | 10 | 85 |
| Applications received | 20 | 11 | 13 | 44 | |
| Applications closed | 38 | 0 | 3 | 41 | |
| Ending balance | 54 | 14 | 20 | 88 | |
| 2017 | Beginning balance | 54 | 14 | 20 | 88 |
| Applications received | 18 | 2 | 2 | 22 | |
| Applications closed | 19 | 1 | 2 | 22 | |
| Ending balance | 53 | 15 | 20 | 88 | |
| 2018 | Beginning balance | 53 | 15 | 20 | 88 |
| Applications received | 27 | 0 | 10 | 37 | |
| Applications closed | 21 | 11 | 3 | 35 | |
| Ending balance | 59 | 4 | 27 | 90 | |
| 2019 | Beginning balance | 59 | 4 | 27 | 90 |
| Applications received | 16 | 3 | 10 | 29 | |
| Applications closed | 17 | 4 | 9 | 30 | |
| Ending balance | 58 | 3 | 28 | 89 | |
| 2020 | Beginning balance | 58 | 3 | 28 | 89 |
| Applications received | 10 | 1 | 11 | 22 | |
| Applications closed | 23 | 2 | 5 | 30 | |
| Ending balance | 45 | 2 | 34 | 81 | |
| 2021 | Beginning balance | 45 | 2 | 34 | 81 |
| Applications received | 23 | 9 | 10 | 42 | |
| Applications closed | 24 | 2 | 8 | 34 | |
| Ending balance | 44 | 9 | 36 | 89 | |
| 2022 | Beginning balance | 44 | 9 | 36 | 89 |
| Applications received | 5 | 6 | 2 | 13 | |
| Applications closed | 5 | 0 | 2 | 7 | |
| Ending balance* | 44 | 15 | 36 | 95 |
Source: Directorate of International Taxation Inventory Case Database
INDONESIAN CA CONTACTS
39. The Competent Authority of Indonesia responsible for processing the MAP and APA can be contacted at:
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
Indonesia Competent Authority and Netherlands Competent Authority has signed Competent Authority Agreement on June, 23 2017 in terms of Closed Fund Mutual Agreement (CFMA), A CFMA which is established in the Netherlands and which receives items of income arising in Indonesia may, represented by its fund manager or its depository, in lieu of and instead of the investors in the CFMA, claim the benefits of the Tax Convention on behalf of the investors, provided that such investors are residents of the Netherlands under the Tax Convention and are beneficial owners of the income from investments in Indonesia and as long as each of the investors meets the requirements and procedures as set forth in Indonesia domestic regulation on tax treaty implementations.
40. For the purpose of communication between CAs, DGT is able to conduct the communication via face to face meetings, call conferences, video conferences, facsimile, and email. DGT prefers and highly encourages to use an email with encrypted attachments for exchanging information as well as position for MAP purposes. For security and confidentiality reasons, instead of mentioning the full identity of the Taxpayer in the subject and body of the email, please be advised to use the initial thereof. The email should always be addressed to the aforementioned dedicated email map@pajak.go.id with cc to the contact information of the Indonesian CA Team as follows:
| Name | Position | Region | |
| Mekar Satria Utama (Mr.) |
Competent Authority(Director of InternationalTaxation) |
• All Jurisdictions | mekar.satriautama@pajak.go.id |
| Agus Kuncara (Mr.) | Deputy Director of International Taxation for Disputes Prevention and Settlement | • All Jurisdictions | agus.kuncara@pajak.go.id |
| Ardya Sam Wibawa Ishar (Mr.) | Head of Section of International Taxation Disputes Prevention and Settlement I |
• Asia (excluding Japan, South Korea, China, Hong Kong (China), Macau (China), Taiwan), • Australia, • New Zealand, and • Other Jurisdictions within Pacific Region |
ardya.ishar@pajak.go.id |
| Wahyu Agung Sudewo (Mr.) | Head of Section of International Taxation Disputes Prevention and Settlement II |
• Japan, and •Jurisdictions within American Region |
wahyu.sudewo@pajak.go.id |
| Petrus Harjono (Mr.) | Head of Section of International Taxation Disputes Prevention and Settlement III | • South Korea, • China, • Hong Kong (China), • Macau (China), and • Taiwan |
petrus.harjono@pajak.go.id |
| Akhmad Mukhatob (Mr.) | Head of Section of International Taxation Disputes Prevention and Settlement IV |
•Jurisdictions within Europe and African Regions | akhmad.mukhatob@pajak.go.id |
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