On 7 September 2026, the Indonesian Directorate General of Taxes (DGT) published an article addressing transfer pricing practices commonly referred to as “friend pricing” (harga teman). The guidance aims to clarify the arm’s length principle for transactions between related parties, emphasizing that pricing must reflect independent market conditions. The article references Article 18 of the Income Tax Law and Minister of Finance Regulation (PMK) 213/PMK.03/2023 on transfer pricing documentation. It highlights the DGT’s increased scrutiny on transactions where prices deviate from market norms without valid economic justification.
Key Takeaways
- Arm’s Length Principle Reinforcement: The DGT reiterates that all related-party transactions must comply with the arm’s length standard, and any “friend price” arrangements lacking commercial rationale will be adjusted during audits.
- Documentation Requirements: Taxpayers are reminded to maintain contemporaneous transfer pricing documentation, including a master file, local file, and country-by-country report (CbCR) for multinational enterprise groups meeting threshold criteria.
- Advance Pricing Agreement (APA) Encouragement: The article promotes the use of APAs to provide certainty on transfer pricing methods, reducing dispute risks and potential penalties.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement