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Berita Pajak

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TNMM and the Selection of the Profit Level Indicator:The Urgency of GPM in Rescuing ROS
Transfer Pricing /

TNMM and the Selection of the Profit Level Indicator:The Urgency of GPM in Rescuing ROS

The selection of the Profit Level Indicator (PLI) is one of the important aspects in applying the Transactional Net Margin Method (TNMM) to test the arm's length nature of an affiliated transaction. However, the selection of an indicator cannot be separated from the characteristics of the transaction, the functional analysis, and the quality of the financial data used. This study discusses the use of Gross Profit Margin (GPM) and Return on Sales (ROS) in the Transfer Pricing dispute of PT YZN for the 2020 Fiscal Year. Based on the case documents, the Taxpayer's GPM of 30.16% was above the interquartile range of the comparable companies of 5.55%–16.07%, while the ROS of 1.73% fell within the comparable range of 1.37%–2.10%. The difference in the ROS test result mainly relates to the treatment of Other Income amounting to Rp5.428 billion, which changes the ROS to -12.14% if not taken into account in operating profit. This study shows that GPM and ROS should not always be positioned as mutually substitutable indicators, but can instead provide complementary perspectives on the transaction being tested. Accordingly, the selection of a PLI needs to be based on a clear analytical objective, be consistent with the characteristics of the transaction and the Taxpayer's functions, assets, and risks, and be supported by relevant and traceable financial data. The quality of benchmarking is determined not solely by the position of the margin within the arm's length range, but also by the accuracy of the data processing and the strength of the evidence underlying the conclusion regarding the arm's length nature of the transaction.

Read more 9 min read
Transfer Pricing Compliance: When Documentation Becomes an Evidentiary Instrument
Transfer Pricing /

Transfer Pricing Compliance: When Documentation Becomes an Evidentiary Instrument

Transfer Pricing Documentation is both a compliance instrument and an evidentiary tool in tax disputes, drawing on a study of the PT YZN case for the 2020 Fiscal Year. The case shows that Transfer Pricing documentation is not sufficient if merely available administratively; it must also be able to explain the basis for the method selection, the functional-asset-risk characterization, the use of the Profit Level Indicator (PLI), the benchmarking process, and how the financial figures used were formed. In this dispute, a difference in the treatment of Other Income amounting to Rp5.4 billion had a significant impact on the calculation of Return on Sales (ROS), underscoring the importance of reconciliation between Transfer Pricing Documentation, financial statements, the general ledger, journal entries, and the underlying transactions. The Taxpayer relied not only on its Transfer Pricing documentation, but also submitted audit reports, account details, and supporting evidence to explain its financial position. Ultimately, the Transfer Pricing correction of Rp5.3 billion was held by the Tax Court to be unsustainable. This study affirms that quality Transfer Pricing compliance must be defensible — that is, able to explain, trace, and prove every analytical conclusion consistently and on an evidentiary basis.

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When the Accounting Perspective Meets the Tax Perspective in Court Proceedings
Perspective /

When the Accounting Perspective Meets the Tax Perspective in Court Proceedings

The use of export data as an instrument for testing tax compliance is an important part of a tax audit. However, a discrepancy between export data and reported business turnover does not automatically prove the existence of unreported sales or income. In the dispute of PT YZN, the tax authority made a turnover correction of Rp387 million based on the equalization of export sales data in the Monthly VAT Return (SPT Masa PPN) with export data in the system of the Directorate General of Customs and Excise. The Taxpayer argued that the transaction underlying the correction was the return of demonstration goods that had previously been obtained as borrowed goods from an overseas affiliate group, not a sales transaction generating income. This article analyzes the importance of distinguishing between the movement of goods, sales transactions, and income in determining the basis for a tax correction. The discussion focuses on the need to test the substance of the transaction, the relationship between trade documents, ownership of goods, cash flow, and accounting records, while still observing the principles of evidence in a tax audit. This article assesses that export data should be positioned as a tool for identifying indications of discrepancy, and not as sole evidence that automatically establishes a turnover correction. A quality tax correction must be supported by evidence that is sufficient, competent, relevant, and able to fully explain the character of the transaction.

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When Numbers Are Not Enough: An Analysis of Evidence in a Transfer Pricing Dispute Featured
Perspective /

When Numbers Are Not Enough: An Analysis of Evidence in a Transfer Pricing Dispute

A Transfer Pricing dispute is not merely about differences in calculation results, but also about how those figures are formed, explained, and supported by adequate evidence. This article analyzes Tax Court Decision Number PUT-002677.15/2025/PP/M.IIIA of 2026 concerning a Transfer Pricing dispute for the 2020 Fiscal Year, focusing on the examination of Return on Sales (ROS), the treatment of Other Income, and the sufficiency of evidence in the tax audit. In this case, a difference in the treatment of Other Income amounting to IDR 5,428,634,343 caused the Taxpayer's ROS to shift from 1.73% to -12.14%, which subsequently formed the basis for a Transfer Pricing correction of IDR 5,323,058,112. The Tax Court Panel considered not only the position of ROS relative to the comparable range, but also assessed the economic substance of the Other Income, the basis for calculating the correction, and the evidence submitted by the parties. The decision demonstrates that benchmarking results and profit level indicators cannot be separated from data quality, transaction characteristics, and the underlying economic substance. In this case, Transfer Pricing Documentation and supporting evidence capable of explaining the relationship between the financial statements, account reclassification, ROS calculation, and affiliated transactions became a critical element in proving the arm's length nature of the transaction. This article affirms that in Transfer Pricing disputes, figures serve merely as the starting point of analysis, while the substance of the transaction and the quality of evidence are the decisive factors in upholding or invalidating a correction.

Read more 7 min read