Minister of Finance Regulation No. 213/PMK.03/2016 (PMK-213) is a regulation issued by the Indonesian Ministry of Finance that governs additional documentation and information requirements for taxpayers engaging in transactions with related parties. The regulation, effective from December 30, 2016, aims to align Indonesia’s transfer pricing documentation rules with international standards, particularly the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 recommendations.

Key Provisions

Scope and Purpose

• PMK-213 targets taxpayers who conduct transactions with parties with whom they have a special relationship (related parties), as defined under Indonesian tax law.
• The regulation seeks to ensure proper application of the Arm’s Length Principle (ALP) in related party transactions and to enhance transparency and compliance in transfer pricing practices.

Three-Tiered Transfer Pricing Documentation
Taxpayers meeting certain thresholds are required to prepare and maintain three types of transfer pricing documentation:

Documentation Type	Description	Timing/Deadline
Master File	Provides an overview of the multinational enterprise (MNE) group’s global business operations, transfer pricing policies, and allocation of income and activities. Must include group structure, intangible assets, financial activities, and consolidated financial statements.	Available within 4 months after fiscal year-end.
Local File	Contains detailed information on the local taxpayer’s business, related party transactions, application of the arm’s length principle, and supporting financial data. More extensive requirements apply to commodity transactions.	Available within 4 months after fiscal year-end.
Country-by-Country Report (CbCR)	Summarizes allocation of income, taxes paid, and business activities by jurisdiction for all group members, both local and foreign. Applies primarily to parent entities in Indonesia or those appointed as CbCR reporting entities.	Available within 12 months after fiscal year-end.

Thresholds for Documentation

• Taxpayers are required to prepare Master File and Local File if they meet any of the following in the preceding tax year:
  • Gross revenue exceeds IDR 50 billion.
  • Related party transactions for tangible goods exceed IDR 20 billion.
  • Related party transactions for services, interest, or other transactions exceed IDR 5 billion.
• CbCR is required for Indonesian parent entities of multinational groups with consolidated gross turnover of at least IDR 11 trillion in the previous year, or if appointed as a CbCR reporting entity.

Language and Submission

• Documentation must be prepared in Bahasa Indonesia unless the taxpayer has approval to maintain books in a foreign language and currency, in which case English is permitted with an Indonesian translation.
• The documentation is not automatically submitted with the annual tax return but must be available for submission upon request by the Directorate General of Taxation (DGT). Taxpayers must attach a statement letter in their tax return confirming the availability of the documentation.

Sanctions

• Failure to prepare or provide the required documentation may result in the tax authority disregarding the taxpayer’s transfer pricing arrangements and making adjustments based on available data, potentially leading to higher tax assessments.

Alignment with International Standards

PMK-213 closely follows the OECD’s BEPS Action 13 framework, introducing the three-tiered documentation approach (Master File, Local File, and CbCR) to improve transparency and consistency in transfer pricing compliance for multinational enterprises.