Transfer pricing is the pricing of business platform transaction with goods, provision of financial services, and payment of fees for immaterial rights.
Basically, for a multinational company (MNC) and the trans-national company has a certain setting in determining the apportion expenses and its subsidiaries. That’s why MNC must understand about transfer pricing that actually can impact shareholder in arranging how taxation can be distributed among countries.
Why is transfer pricing matter for nowadays?
Transfer pricing aims to increase the importance of the tax authorities and to a business. Rules of transfer pricing are made to provide companies with the flexibility in transactions. Generally, the transfer pricing system is used to ensure the transferred between intercompany is based on market conditions.
Transfer pricing is the key to decision making and strategic reviews in a country. Transfer pricing is matter due to can be impact the financial system in a global economy. It also about the efforts of connected companies bearing to the sale of property, tax services, finance, and the use of intellectual property.
If you lived in the international economic system, actually the transfer pricing was becoming complex in the area of penalties. Despite tax authorities have rules but in common view, they did not appear to use in the good ways.
The purpose of transfer pricing is to push profits into territories whether for the favorable tax rates and where more loopholes exist to be exploited.
In Indonesia, as we know that The Indonesian Ministry of Finance implements the guidance on transfer pricing documentation contained in PMK-213. It was made by 2016 with significant changes consist of who needs to prepare transfer pricing documentation and what comprises of transfer pricing documentation.
According to the Indonesian Ministry of Finance, Taxpayers are recommended to consider immediate action steps to ensure compliance with PMK-213. Taxpayers should note that the transactional and revenue thresholds are based on the prior fiscal year’s transactional and revenue information.