CBCR In Indonesia
I n a c c o r d a n c e w i t h P M K – 2 1 3 a n d P E R – 2 9
Following the release of Country-by-Country Report (“CbCR”) requirements in early 2017 through Minister of Finance (“MoF”) Regulation No. 213/PMK.03/2016 (“PMK-213”), The Directorate General of Taxation (“DGT”) has isSsued a long-awaited and yet more comprehensive guidance on the implementation of CbCR through DGT Regulation No. 29/PJ/2017 or (“PER-29”). Therefore, this publication is intended to help companies understand about what CbCR is, who is required to prepare CbCR, and how to file CbCR.
Both PMK-213 and PER-29 implement the guidance on transfer pricing documentation contained in Base Erosion Profit Shifting (“BEPS”) Action 13 of the Organisation for Economic Co-operation and Development (“OECD”). However, PER-29 is a more recent of regulatory framework for CbCR Subsequent to PMK-213.
WHAT IS CBCR ?
CbCR shall be used only for the purpose of evaluation of risk avoidance. The format of the CbCR under PMK-13 (Appendix F and G) is aligned with BEPS Action 13 recommendations, which required the Multinational Enterprises (MNEs) to provide the information in relation to their global allocation of the income, taxes paid and business activities among countries according to a standard template. Appendix E of PMK-213 represents working paper of CbCR and this form is only required to be filed by the Indonesian Parent Entity under Primary Mechanism Filing.
WHO IS REQUIRED TO FILE CBCR IN INDONESIA?
In accordance with PER-29, CbCR is required to be prepared and filed in Indonesia, if one of the following criteria is satisfied:
a. A parent of a business group having consolidated gross revenue of IDR 11,000,000,000,000 (eleven trillion Rupiah). In this case, the parent entity shall be required to file CbCR under “Primary Filing Mechanism” as explained in the following chart:
NoteS:
1) Parent Entity is defined as a member of a Business Group that:
a. Directly or indirectly controls one or more other members in the Business Group, and
b. Has the obligation to prepare consolidated Financial Statements based on the Financial Accounting Standard applicable in Indonesia (PSAK) and/or based on the provisions that bind the issuers of stock exchanges in Indonesia;
c. A Parent Entity whose shares are neither directly nor indirectly owned by other constituent entity(ies) within the group; and
d. A Parent Entity whose shares are owned either directly or indirectly by other constituent entity(ies), but the said constituent entity(ies) does not have the obligation to consolidate the financials of the said domestic parent entity.
2) Business Group is a group of tax subjects comprising of related parties that carry out business activities.
An Indonesian Parent Entity cannot appoint another entity in Indonesia or in an overseas jurisdiction to meet its CbCR obligation.
b. An Indonesian taxpayer whose parent entity is a foreign taxpayer would be required to file CbCR locally if any of the following conditions apply:
The Parent Entity’s jurisdiction does not require the parent entity to submit a CbCR;
The Parent Entity’s jurisdiction does not have an exchange of information agreement for taxation purposes with the Indonesian Government (i.e, a Qualifying Competent Authority Agreement or QCAA*).
There is an agreement with the Indonesian Government on tax information exchange, but the CbCR information could not be obtained by the Indonesian Government from that country / jurisdiction.
In this case, “Secondary Filing Mechanism” applies to any Indonesian Subsidiaries, Branches or Permanent Establishments of groups with Foreign Parent Entity (as seen in the chart):
Notes:
1) Constituent Entity is defined as the Parent Entity and the members of a Business Group covered in the CbCR. This Secondary Filing mechanism is applicable should fulfill the following criteria:
• FPE which has a consolidated gross revenue in the related year, at the least:
- equivalent to € 750 million if the country/jurisdiction of a FPE does not require the filing of CbCR; or
- equivalent to the amount as stipulated in the FPE’s jurisdiction regarding the filing of CbCR.
• Every separate business entity that is a member of a Multinational Enterprise (MNE) Group which included in consolidated financial statement of the Multinational Group; or excluded due to the degree of insignificance of materiality considerations.
• Every Permanent Establishment that is a member of the Group Enterprise, which prepare a separate Financial Statement from the Business Group.
2) In the case of more than one Local Constituent Entity, the FPE may appoint one of Local Constituent Entity to submit a CbCR to the Indonesian Tax Authority (ITA);
3) CbCR cannot be obtained through the automatic exchange of information due to the following conditions:
a. delays in CbCR automatic exchange due to matters other than those set forth in QCAA; or
b. the occurrence of repeated failures to CbCR automatic exchange of information with Partner Country or Partner Jurisdiction
In the event that FPE has designated an overseas Constituent as a Foreign Surrogate Parent Entity (FSPE) as a substitute of FPE, the local taxpayer is not required to submit the CbCR as long as fulfilled the following conditions (please also see the below chart):
a. The taxpayer in Indonesia notifies the DGT about which constituent entity is appointed as a FSPE;
b. The country / jurisdiction where such appointed FSPE resides obliges its taxpayers to file a CbCR and such country / jurisdiction has a QCAA with Indonesia; and can be obtained by the Local Authority in Indonesia.
c. The appointed constituent entity should be the only entity within the group that is appointed as a surrogate parent entity.
However, in the absence of any of the condition(s) above, the Local Taxpayer of a Foreign Entity is therefore liable to file CbCR in Indonesia under Secondary Filing Mechanism.
Notes:
1) Foreign Parent Entity (FPE) is entity that:
a. Directly or indirectly controls one or more other Constituent Entities within the Multinational Business Group;
b. Has the obligation to prepare consolidated Financial Statements in accordance with the Financial Accounting Standard Financial Accounting or applicable provisions in the country or jurisdiction where the entity is domiciled;
c. A Parent Entity whose shares are neither directly nor indirectly owned by other constituent entity(ies) within the Multinational Business Group or owned either directly or indirectly by other constituent entity(ies), but the said constituent entity(ies) does not have the obligation to consolidate the Financial Statement of the entity;
d. Has a consolidated gross turnover in the taxable year concerned at least:
1) equivalent to € 750 million based on the functional currency exchange rate of the FPE as of 1 January 2015 in the case of the State or Jurisdiction where the FPE referred to does not require the submission of CbCR; or
2) shall be the limit of consolidated gross revenue which becomes the basis for determining the obligation of CbCR submission as stipulated in the country or jurisdiction where the FPE is domiciled.
FILING SUBMISSION AND NOTIFICATION LETTER
PER-29 introduces the requirements for certain taxpayers to provide a CbCR Notification. The CbCR Notification form aims to provide information to the DGT whether the taxpayer file the CbCR as to the Local Parent Entity or Local Constituent Entity of FPE (or through its Surrogate) as well as the statement of obligation to submit CbCR. Thus, whether or not Parent Entity taxpayers would be required to prepare and file a CbCR Notification to the DGT, it can be explained based on the circumstances as shown in the following chart:
Legend:
- The four criteria of the Local Parent Entity / Local Constituent Entity of FPE is required to submit CbCR Notification (Form B of PER-
29) to the Indonesian Tax Authorities (ITA). Form E, Form F (CBC-1) and Forms G (CBC-2 and CBC-3) of PMK-213 must be submitted by the Local Parent / Constituent Entity which is required to submit the CbCR along with CbCR Notification to the ITA whereas the non-mandatory only conveys CbCR Notification; - Copies of receipt notices of CbCR Notification and Form CbCR issued by the ITA can be attached to Annual CITR in place of the CbCR Form of PMK-213 which should initially be enclosed along with CITR.
With regard to the preparation of the CbCR, PER-29 also specifically stipulates that under certain circumstances, the CbCR should be prepared electronically i.e., with Extensible Markup Language (XML) schema. Note that, for Local Constituent Entity of FPE does not require the provide working papers of CbCR, in the form of a digital copy (softcopy) with XML schema referred to above.
The CbCR Form and/or its Notification Form should be submitted to the DGT at the latest by:
- 16 (sixteen) months after the end of the fiscal year for fiscal year 2016 or 30 April 2018, and
- 12 (twelve) months after the end of the fiscal year for fiscal year 2017 onwards.
In addition, should the CbCR may not be obtained by the ITA through the automatic exchange of information from QCAA, thus the Constituent Entity of FPE shall submit CbCR within 3 (three) months after the announcement of the list of Country Partner or Jurisdiction Partner whose CbCR cannot be obtained. In the event that CbcR is not submitted within 3 (three) months, the ITA will immediately issue a CbCR Submission Request Letter which must be submitted by the taxpayer within 30 (thirty) days of the issuance of the Letter.
PENALTIES
PER-29 does not specifically identify any kind of penalties or consequences that may arise due to the taxpayer’s failure to meet CbCR requirements within the required timeline.
However, in the case that taxpayer fail to attach its CbCR documentation to the annual CITR (should we refer to PMK-213), the taxpayer is then considered as not applying to arm’s length principle (ALP) and therefore the taxpayer may subject to penalties of IDR 1,000,000 plus up to 50% of any unpaid tax due to incomplete or late submission of the annual CITR.
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