Indonesia’s head of transfer pricing issues audit warning

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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 & shared bottom lb ros

More from across our site

Countries which care about fair taxation of tech multinationals and equitable global distribution of wealth should back the UN’s tax framework, writes economist Abdelmalek Riad
The cuts disproportionately affected staff in certain positions, the report also found; in other news, MHA announced the €24m acquisition of Baker Tilly South East Europe
The plan aims to improve the efficiency, transparency, and effectiveness of direct tax administration in India
Meanwhile, South Africa’s finance minister has accepted a court decision on suspending a VAT increase and US President Donald Trump mulls a 100% tariff on foreign films
Jaime Carey speaks about the benefits of his tax background, DEI values, the use of AI for a smarter legal practice, and other priorities that will define his presidency
Historically low levels of attrition over consecutive years made a ‘difficult decision’ necessary, PwC has reportedly said
WTS Global is also vetting new potential member firms in Algeria, Cote D’Ivoire and Benin, Kelly Mgbor tells ITR in an exclusive interview
The scope of qualifying pillar two tax credits could reportedly be broadened; in other news, hundreds of IRS appeals staff are to resign
For many taxpayers, the prospect of long-term certainty that a bilateral APA offers can override concerns about time, cost and confidentiality
Levine, who served under the Joe Biden administration, led the US’s negotiations on the OECD’s two-pillar solution
Gift this article