New Guidelines for the Retention of Transfer-Pricing Documents

The Ministry of Finance (“Minister”) has issued Regulation No. 213/PMK.03/2016 on the Types of Additional Documents and/or Information which Should Be Retained by Taxpayers Undertaking Transactions with Affiliated Parties and Their Management Procedures (“Regulation 213/2016”).In essence, Regulation 213/2016 aims to provide further guidelines for taxpayers as regards the retention and management of any documents and/or information which is used in their bookkeeping processes, particularly documents deemed relevant to any taxpayer transactions which are undertaken with their affiliates. [1] Obligation to Retain Transfer-Pricing DocumentsIn general, taxpayers who are working as entrepreneurs, freelancers or corporate taxpayers are required to collect, record and store their financial information during any given fiscal year. Such information is to be presented as a financial statement which is to be attached when any such taxpayers submit their annual income-tax reports (“Income-Tax Reports”) to the Directorate General of Taxation. Such taxpayers must also retain any documents/information which are ultimately used in drawing up of said financial statements, including any other additional documents which are deemed relevant to the bookkeeping process. [2] If such taxpayers enter into any transactions with parties which are affiliated with them, then such additional documents/information should consist of any documents/information which show that the transactions in question have complied with the so-called arm's-length principle(prinsip kewajaran dan kelaziman usaha).It should be noted that an affiliation (hubungan istimewa) may be implemented if the following conditions are met: [4]