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May 19, 2020
2020-5733

EY Global Tax Controversy Flash Newsletter (Issue 22) | Companies must remain focused on transfer pricing controversy management in Indonesia, given recent tax audit trends and regulatory changes

The importance of an Indonesian taxpayer’s local file as audit defense documentation and penalty protection has been highlighted again by heavy scrutiny of Local Files during recent audits by the Indonesian Tax Authority (ITA). The ITA has recently escalated tax audits for certain taxpayers to criminal investigations based on the contents of their local file. The ITA has been particularly focused on comparable companies’ searches where there was perceived to be an absence of functional comparability as these were considered “potentially abusive.” This development highlights how critical it is for taxpayers to develop and maintain robust documentation in the Local File for both audit defense and penalty protection.

A new advanced pricing agreement (APA) regulation has also recently been released. This new regulation establishes a more comprehensive APA regime with: changes in criteria for taxpayers applying for an APA, shortened timelines for the APA process (including the timeline for taxpayer and competent authority responsiveness during the APA process) and established core transfer pricing principles that the ITA will apply during the APA process.

Read more about the regulations and how to manage these risks in this EY Global Tax Alert and listen to a discussion from EY's 23 April 2020 webcast on the Tax Policy and Controversy Outlook 2020 - Asia-Pacific.

Additional information and links to past newsletters can be found in the attached PDF.

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