Implementing BEPS in Indonesia
It is known that Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies
that exploit gaps and mismatches in tax rules to artificially shift profits to low-tax or no-tax
countries/locations which do not have any economic activity resulting overall corporate tax
not being paid in the right amount as well as causing the government to lose significant
income from corporate tax as the result of tax planning done by multinational companies
by shifting their profits to other countries that offer more profitable tax incentives or apply a
lower tax rate.
Eventhough it is not a member country of the OECD, Indonesia has been
supportive of the BEPS project since 2013 and has expressed much intention to become
an associate member since then. Indonesia supports the view that BEPS could raise a
high risk to the tax revenue of Indonesia. The Indonesian tax authorities have also
indicated that significant efforts have been made to resolve this issue. Among of those
efforts are conducted by addressing the tax challenges of the digital economy, neutralizing
the effects of hybrid mismatch arrangements, strengthening controlled foreign company
rules, limiting base erosion via interest deductions and other financial payments,
countering harmful tax practices more efficiently including taking into account transparency
and substance, preventing the granting of treaty benefits in inappropriate circumstances,
preventing the artificial avoidance of permanent establishment status, making guidance on
transfer pricing aspects of intangibles, assuring that transfer pricing outcomes are in line
with value creation, risks and capital, reassuring that transfer pricing outcomes are in line
with value creation: other high-risk transactions, establishing methodologies to collect and
analyse data on BEPS and the actions to address it, specifying the requirements for
taxpayers to disclose their aggressive tax planning arrangements, making guidance on
transfer pricing documentation and country-by-country reporting, making dispute resolution
mechanisms more effective, and developing a multilateral instrument to modify bilateral tax
treaties.
For BEPS Action Plan to be implemented in Indonesia, those efforts above must
meet the related rules in Indonesia, specifically The Income Tax Law (last amended in
2008) which is suggested to mention electronic transactions carried out through the
internet (e-commerce) treated in a specific way under such Law. Moreover, to counter
harmful tax practices, there are some tax facilities available in Indonesia such as tax
holidays and tax allowances which are intended to attract investements. The Ministry of
Finance Regulation number 60/PMK.03/2014 promotes the exchange of information to
increase the transparency of such act. On the one hand, Indonesia has also adopted anti-
treaty abuse provision in some of its tax treaties and implementing anti-treaty abuse rules
domestically.
With regards to transfer pricing, Indonesia has issued several implementing
regulations i.e. Director General of Taxes (DGT) Regulation PER-43/PJ/2010, as amended
by PER-32/PJ/2011, requiring taxpayers to submit documents for transactions with related
parties. Whilst PER-22/PJ/2013 and its appendix is a guidance issued by the Directorate
General of Taxes for the tax officers to audit taxpayers and to make sure that taxpayers
are using the arm’s length principle for transactions. Similar to this, Indonesia has also
issued some regulations on Advanced Pricing Agreement (APA) and Mutual Agreement
Procedure (MAP) among of them are DGT Regulation PER-48/PJ/2010 and Government
Regulation …
Regulation 74/2011, as well as Minsitry of Finance Regulation number 240/PMK.03/2014
mentioning that taxpayers may apply for a MAP concurrently with local dispute resolution.
I personally believe that the knowledge will be taking from this short course will
enhance my ability to work as a tax official of Subdirectorate of Collection in Directorate of
Audit and Collection by contributing in mitigating the risks of the tax payer debts through
profiling the company in a better way. Besides, this course will give me occasion to meet
and discuss with the other participants from other participating countries so that I would get
global views on how they implement BEPS in their countries. I am looking forward to
seeing the implementation of BEPS in Indonesia resulting the increase in tax revenue
collected and distributed for the wealth of the country.
Written by:
Muhammad Futhra Bahar
19861202 200812 1 002
REFERENCES:
OECD, Addressing Base Erosion and Profit Shifting (OECD Publishing 2013), International
Organizations’ Documentation IBFD
OECD, Transfer Pricing Guidelines, 2013
N.Z. Arifin, BEPS Dalam Kerangka Kerja Sama G20 Dan Implementasinya Kepada
Indonesia, BKF Republik Indonesia, https://www.perpustakaan.depkeu.go.id/
