Indonesia’s head of transfer pricing issues audit warning
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Indonesia’s head of transfer pricing issues audit warning

Indonesia’s head of transfer pricing has told a seminar of tax professionals the criteria used for initiating an audit, amid increased scrutiny from the country’s tax authorities.

Bapak Edward Hamonangan Sianipar, the section head of the transfer pricing unit at the Indonesian Directorate General of Taxation (ITO), told the audience that there are five situations that are likely to lead to an audit.

Pak Edward explained that the declaration of consistent losses, payment of minimal taxes, significant related party transactions, variations from commercial norms, and a lack of appropriate supporting documentation would all likely lead to an audit.

It was also explained that the ITO has over 1,000 dedicated staff, of which about 60% are auditors. Therefore, the risk of being audited is very real for companies characterised by any of the above situations.

Pak Edward also mentioned that the ITO plans to select 10 taxpayers for review from each tax office, starting with the large and medium taxpayers offices and those dealing with foreign investors. Out of these companies reviewed, the ITO has set a target of four to be selected for a full transfer pricing audit.

“To reduce the risk of reviews and audits mentioned by the ITO, companies should implement practices which diminish the number of key audit exposure factors or prepare complete documentation to prove the arm's-length nature of their related party transactions,” said Steven Tseng, China & Asia-Pacific transfer pricing leader at KPMG.

The conference concluded by stating that taxpayers should take extra precautions to prevent an audit.

It was outlined that being able to demonstrate where differences in facts justify different price, demonstrating the ‘willingness to pay’ concept for services, providing rigorous determination of cost bases and allocations, and providing complete documentation during an audit all will help in reducing the risk of an audit.

This news comes after the ITO asked taxpayers to attend a training seminar conducted by its transfer pricing team.



more across site & bottom lb ros

More from across our site

Burrowes had initially been parachuted into the role last summer to navigate the fallout from the firm’s tax leaks scandal
Barbara Voskamp is bullish on hiring local talent to boost DLA Piper’s Singapore practice, and argues that ‘big four’ accountants suffer from a stifled creativity
Chris Jordan also said that nations have a duty to scrutinise the partnership structures of major firms, while, in other news, a number of tax teams expanded their benches
KPMG has exclusive access to the tool for three years in the UK, giving it an edge over ‘big four’ rivals
But the US tax agency’s advice is consistent with OECD guidance and shouldn’t surprise anyone, other experts tell ITR
A survey of more than 25,000 in-house counsel reveals that diversity initiatives are a high priority when choosing external counsel
The report is aimed at helping 'low-capacity countries', the OECD has claimed
The UK tax agency appears to be going after easier, lower value targets, one lawyer has claimed
Criminal experts have told ITR that the case of Ulf Johannemann emphasises the fine line between tax avoidance and tax evasion
The ATO workers were among nearly 57,000 people who were duped into claiming fake GST refunds, while Kuwait signed a double taxation treaty with the UAE
Gift this article