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.22/PMK.03/2020 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.

Purpose 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. 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 or Bilateral APA

6. 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 country 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 country containing a MAP article, taxpayer may request for Bilateral APA in accordance with Article 2 Paragraph (1) of MoF Regulation 22/PMK.03/2020 (“PMK 22/2020”).

7. 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.

Applying for APA

8. Indonesian taxpayer may apply for an APA to Director General of Taxes concerning a Related Party Transaction based on:

  1. Taxpayer's initiative, in form of Unilateral APA or Bilateral APA; or
  2. Written notification from Director General of Taxes in relation with a Bilateral APA application that is requested by a non-resident taxpayer to the Competent Authority of Treaty Partner.

9. 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.

10. APA consist of agreement on:

  • Transfer Pricing criteria; and
  • Determination of 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:

  1. the identity of the Related Party covered in the APA;
  2. the related party transaction covered in the APA;
  3. the Transfer Pricing Method applied;
  4. how to apply the transfer pricing method agreed; and
  5. 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.)

11. APAs won’t 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:

  1. it has fulfilled the obligation to submit the Annual Corporate Income Tax Return for 3 (three) fiscal years prior to the fiscal year when APA application is submitted;
  2. it has been required and fulfilled the obligation to produce and keep Transfer Price Documentation (master file and local file) for 3 (three) fiscal years prior to the fiscal year when APA application is submitted;
  3. it is not currently under investigation for tax crime or currently under penalty for tax crime;
  4. the Related Party and Related Party Transactions proposed to be included in the APA application have been reported by the Taxpayer in the Annual Corporate Income Tax Return as referred to in letter a; and
  5. 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 smaller than the operating profits as reported in the Annual Corporate Income Tax as referred to in letter a.

Initial Stage

12. As per the PMK 22/2020, there is no longer a prelodgment process.

13. 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 send a softcopy of their APA request to map@pajak.go.id and communicate to the Indonesian CA Contacts found below. Taxpayer should also make their Account Representative aware of their interest in an APA and send them a copy of the correspondence.

14. The APA application must submitted by filling in correctly, completely, and clearly the APA application form as listed in Attachment letter A in the PMK 22/2020. The form then must signed by the management whose name is listed in deed of establishment or deed of amendment.

15. The APA application must be submitted in the period of 12 (twelve) months up to 6 (six) months prior to the start of the APA Period.

16. The APA application must be enclosed with:

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

17. DGT will assess the application and subsequently issue a written notice to the taxpayer (and the corresponding Treaty Partner if it is Bilateral APA) whether the application is accepted or rejected. 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 actionable.

18. Taxpayer whose APA application is accepted is required to complete the application with:

  • financial statements audited by a public accountant for the last 3 (three) fiscal years prior to the fiscal year when APA application is submitted;
  • Transfer Pricing Documentation for the last 3 (three) fiscal years prior to the fiscal year when APA application is submitted; and
  • document containing a detailed explanation of the application of the arm's length principle for each Related Party Transaction that is proposed to be included in APA, in Indonesian language (Attachment letter B in the PMK 22/2020).

19. 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.

20. 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 Period and ‘Roll-Back’

21. 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.

22. An APA is intended to cover periods in advance of those where a return is already made at the date of application (i.e. prospective). 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 transfer pricing adjustments to be made for tax purposes as a consequence of the agreement.

23. PMK 22/2020 allows the agreed transfer pricing methodology to be applied for an earlier period (“Roll-back”) if

  1. the facts and conditions of the related party transaction does not differ materially from the facts and conditions of the related party in the APA;
  2. the statute of limitation transaction agreed for tax assessment has not been surpassed
  3. no Notice of Tax Asssessment for Corporate Income Tax has been issued; and
  4. no criminal investigation is being conducted or 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.

24. Taxpayer requesting roll-back should expect DGT to carry out audit for other purposes in accordance with the provisions of legislation on taxation.

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.

APA Discussion Stage

26. On receipt of an application DGT will

  1. carry out an assessment to the Taxpayer concerning the Taxpayer's APA application;
  2. visit the place of business of the Taxpayer and/or Taxpayer's Related Party;
  3. interview the management and/or employee of the Taxpayer;
  4. ask for the Taxpayer to provide additional data and/or information in the form of evidence, whether in form of document or statement;
  5. ask for the Related Party or other parties concerned to provide data and/or information in the form of evidence, whether in form of document or statement.

27. 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. Taxpayer shall provide information which 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.

28. 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.

29. 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.

30. Bilateral APA is governed by MAP protocol. 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 government-to-government process.

Reaching Agreement

31. DGT may not agree on the APA application if:

  1. the Affiliated Transaction is not based on the economic purpose;
  2. the economic substance of the Affiliated Transaction is different with its formal form;
  3. the Affiliated Transaction is conducted with one of its purposes is to minimalize the tax expense;
  4. 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;
  5. the information and/or evidence or statement cannot be obtained by DGT within the period of 14 days since the date of written request; and/or
  6. (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.

32. 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.

33. DGT endeavours to complete the APA discussion within 12 months from the acceptance of APA request (for Unilateral APA). In the case of Bilateral APA, within the timeline stipulated in MAP regulation, which is 24 months. 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 an APA and may then discontinue the APA process as a result.

34. 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).

35. 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.

36. 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 discussion beyond the point at which it has determined that agreement cannot be reached.

37. Indonesian taxpayer may file a request for Unilateral APA negotiation, in the event that:

  1. the Bilateral APA negotiation resulted in disagreement; or
  2. the Bilateral APA process is terminated because of the Competent Authority of the Treaty Partner did not submit any written answer.

38. The above-mentioned request for Unilateral APA negotiation must be submitted to Director General of Taxes through 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 terminated.

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 Compliance

40. As per the PMK 22/2020, annual compliance report is not necessarily be submitted as 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.

41. The transfer pricing documentation which contains the implementation of APA agreement shall be available at the same time with tax return, which is not later than 4 (four) months after the end of 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.

42. 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

43. In accordance with Article 18 and 19 of PMK-22, an APA may be evaluated by DGT, and DGT is authorized to:

  1. carry out an evaluation with the taxpayer concerning the implementation of agreement in APA;
  2. ask for the taxpayer to provide information and/or evidence or statement necessary;
  3. visit the place of business of the taxpayer and/or taxpayer's related party;
  4. interview the management and/or employee of the taxpayer; and/or
  5. to ask for information and/or evidence or statement from the related party or other parties concerned.

44. Based on the evaluation, DGT is authorized to review or to cancel the APA.

45. 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).

46. Taxpayer may, if deemed necessary, to request for a review. The request for APA review must be submitted directly to Director General of Taxes through Director of International Taxation by filling correctly, completely, and clearly the form as referred to in Attachment letter E in PMK-22/2020.

47. The result of APA review negotiation will be set forth in the amendments to the APA Text or to the Mutual Agreement.

48. As stated above, APA 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. 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, i.e.:

  1. Taxpayer provides information and/or evidence or statement that is not true or not in accordance with the actual conditions; and/or
  2. 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 whether it is requested by DGT.

49. 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

50. In renegotiating agreements after a certain period ends as referred to in Article 3 section (2), taxpayer may submit APA renewal request to Director General of Taxes through the Tax Office where taxpayer is registered.

51. 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.

51. The taxpayer may request renewal of an APA for 1 (one) APA period. The renewal may be granted insofar as:

  1. Taxpayer implements all agreements in the previous APA;
  2. there is no material change to the facts and/or conditions of related party transactions covered in the previous APA with critical assumptions agreed in the previous APA; and
  3. entities and the related party transaction proposed to be included in the APA renewal are the same with the previous APA.

53. 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. As such, DGT does not assess the formal requirement (completeness and eligibility) and proceeds directly to material assessment.

 

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