Pricing and

1
Transfer Pricing
Transfer Pricing Overview
Ex-post versus Ex-ante
Penerapan Prinsip Kewajaran dan Kelaziman
Usaha
 Dasar Hukum 2

Pasal 18 ayat (4) UU PPh dan Pasal 2 ayat (2) UU PPN

Hubungan Istimewa

Pasal 18 ayat (3) UU PPh

Kewenangan Dirjend Pajak

PER-32/PJ/2011
Pedoman Penerapan Prinsip Kewajaran dan Kelaziman Usaha

PER-22/PJ/2013
Pemeriksaan Transfer Pricing

SE-50/PJ/2013
Petunjukan Teknis Pemeriksaan Transfer Pricing

PMK-213/PMK.03/2016
Jenis Dokumen dan atau Informasi Tambahan Yang Wajib Pajak Disimpan Oleh Wajib Pajak
Yang Melakukan Transaksi Dengan Para Pihak Yang Mempunyai Hubungan Istimewa dan Tata
Cara Pengelolaannya
Pedoman Internasional 3

OECD Transfer
Pricing Guidelines

UN Transfer
Pricing Manual
OECD Base Erosion and Profit
Shifting 4
Hubungan Istimewa 5

Hubungan Istimewa adalah hubungan antara

Wajib Pajak dengan pihak lain
sebagaimana dimaksud dalam Pasal 18 ayat (4)
Undang-Undang PPh atau Pasal 2 ayat (2)
Undang-Undang PPN.
Prinsip Kewajaran dan Kelaziman
Usaha 6

Prinsip Kewajaran dan Kelaziman Usaha (Arm's length

principle/ALP) merupakan prinsip yang mengatur
bahwa apabila kondisi dalam transaksi yang dilakukan
antara pihak-pihak yang mempunyai Hubungan
Istimewa sama atau sebanding dengan kondisi dalam
transaksi yang dilakukan antara pihak yang tidak
mempunyai Hubungan Istimewa yang
menjadi pembanding, maka harga atau laba dalam
transaksi yang dilakukan antara pihak-pihak
yang mempunyai Hubungan Istimewa harus sama
dengan atau berada dalam rentang harga atau laba
dalam transaksi yang dilakukan antara pihak yang
tidak mempunyai Hubungan Istimewa yang menjadi
pembanding.
Harga Wajar atau Laba Wajar 7

Harga Wajar atau Laba Wajar adalah harga atau

laba yang terjadi dalam transaksi yang dilakukan
antara pihak-pihak yang tidak mempunyai
Hubungan Istimewa dalam kondisi
yang sebanding, atau harga atau laba yang
ditentukan sebagai harga atau laba yang
memenuhi Prinsip Kewajaran dan Kelaziman
Usaha
Kesebandingan (Comparability) 8

Kesebandingan: kondisi transaksi afiliasi sebanding

dengan kondisi transaksi independen
1. The contractual terms of the transaction.
2. The functions performed by each of the parties to the
transaction, taking into account assets used and risks
assumed, including how those functions relate to the
wider generation of value by the MNE group to which
the parties belong, the circumstances surrounding the
transaction, and industry practices.
3. The characteristics of the property transferred or
services provided.
4. The economic circumstances of the parties and of the
market in which the parties operate.
5. The business strategies pursued by the parties. (OECD,
Action 8 10)
Analisis Kesebandingan
(Comparability Analysis) 9

Analisis Kesebandingan adalah analisis yang

dilakukan oleh Wajib Pajak atau
Direktorat Jenderal Pajak atas kondisi dalam
transaksi yang dilakukan antara Wajib Pajak
dengan pihak yang mempunyai Hubungan
Istimewa untuk diperbandingkan dengan kondisi
dalam transaksi yang dilakukan antara pihak-
pihak yang tidak mempunyai Hubungan Istimewa,
dan melakukan identifikasi atas perbedaan
kondisi dalam kedua jenis transaksi dimaksud.
Transfer Pricing Method 10

Comparable Transactional Transactional

Uncontrolled Resale Price Cost Plus Net Margin Profit Split
Price Method Method

gross gross operating operating

price
profit profit profit profit
Pemilihan Metode Transfer Pricing 11

Kondisi transaksi

Ketersediaan pembanding

Kekuatan dan kelemahan tiap metode transfer

pricing
Transfer Pricing Review (1) 12

Lampiran
Khusus 3A SPT
PPh Tahunan

Audited
Transfer Pricing
Financial
Documentation
Statements

Related
Party
Transaction
Transfer Pricing Review (2) 13

Amount of
transaction

Related Type of
Party transaction

Related
Party
Transaction
Arms Length Principle Approach 14
Ex-post (outcome-testing approach)
Ex-ante (price-setting approach)
Arms Length Approach 15

Arm's length Arm's length

price setting outcome-testing
approach approach
Arms Length
Principle

16
Ex-Post Definition 17

Ex-post is another word for actual returns and is

Latin for "after the fact." The use of historical
returns has customarily been the most well-
known approach to forecast the probability of
incurring a loss on an investment on any given
day. Ex-post is the opposite of ex-ante, which
means "before the event."
Read more: Ex-Post Definition |
Investopedia http://www.investopedia.com/ter
ms/e/expost.asp#ixzz4ZNpoFaBd
Ex-Ante Definition 18

Ex-ante, derived from the Latin for "before the

event," is a term that refers to future events,
such as future returns or prospects of a company.
Ex-ante analysis helps to give an idea of future
movements in price or the future impact of a
newly implemented policy.
An example of ex-ante analysis is when
an investment company values a stock ex ante
and then compares the predicted results to the
actual movement of the stock's price.
Business Process 19

Input Process Output/Outcome

Price Setting (Ex- Business Transactions Testing Price (Ex-
ante) post)
Ex-post Approach and ALP 20

In particular, the parties will not know about

and may also have significant difficulties in
predicting how subsequent developments will
affect the attractiveness of a particular
transaction structure or price. An ex-post
approach would therefore bear no sound
relationship to the situation facing unrelated
parties negotiating a contract.
(Bullen, 2011)
Ex-ante and Ex-post 21

In the absence of evidence of rights and

obligations in a comparable situation, it may be
necessary to determine what rights and obligations
would have been put in place had the two parties
transacted with each other at arms length. In
making such an evaluation, care must be taken to
avoid the use of hindsight (see paragraph 3.74).

(Paragraph 9.56, OECD TPG)

Ex-post Flow Process 22

Price Setting

Affiliated
Parties
Transactions

Applying
Outcome ALP :
Result?
Ex-ante Flow Process 23

Price Setting

Applying
Simulation ALP =
Result?

Affiliated
Parties
Transactions
The conditions for a transaction
at the same time 24

In certain cases, the arms length principle may result

in an administrative burden for both the taxpayer and
the tax administrations of evaluating significant
numbers and types of cross-border transactions.
Although associated enterprises normally establish the
conditions for a transaction at the time it is
undertaken, at some point the enterprises may be
required to demonstrate that these are consistent with
the arms length principle.

(Paragraph 1.12, OECD TPG)

Information at the time of the
determination 25

Each taxpayer should endeavour to determine transfer pricing

for tax purposes in accordance with the arms length principle,
based upon information reasonably available at the time of the
determination. Thus, a taxpayer ordinarily should give
consideration to whether its transfer pricing is appropriate for
tax purposes before the pricing is established. For example, it
would be reasonable for a taxpayer to have made a
determination regarding whether comparable data from
uncontrolled transactions are available. The taxpayer also could
be expected to examine, based on information reasonably
available, whether the conditions used to establish transfer
pricing in prior years have changed, if those conditions are to be
used to determine transfer pricing for the current year.

(Paragraph 5.8, OECD TPG)

Transfer Pricing Documentation 26

It would be expected that the application of these

principles will require the taxpayer to prepare or
refer to written materials that could serve as
documentation of the efforts undertaken to
comply with the arms length principle, including
the information on which the transfer pricing was
based, the factors taken into account, and the
method selected.

(Paragraph 5.9, OECD TPG)

 Pricing and
27
Transfer Pricing
Price Level 28

End-user
Retailer
Reseller
Wholesaler
Manufacturer
Supplier/Vendor
Type of Product or Service 29

Finished Good
Semi-finished Good
Raw Material
Market Availability

Commodity
Can other vendors or suppliers provide it?
Are there any substitution products or services in
markets?
Internal Comparable 31

Sale or purchase goods to/from independent parties?

Render or receive services to/from independent parties?
Pricing policy/mechanism?
Five factors of comparability:
1. The contractual terms of the transaction.
2. The functions performed by each of the parties to the transaction,
taking into account assets used and risks assumed, including how
those functions relate to the wider generation of value by the MNE
group to which the parties belong, the circumstances surrounding the
transaction, and industry practices.
3. The characteristics of the property transferred or services provided.
4. The economic circumstances of the parties and of the market in which
the parties operate.
5. The business strategies pursued by the parties. (OECD, Action 8 10)
Which Price? 32

Negotiated price?
Quotation price?
Bidding price?
Hierarchy price?
Price list?
Published price?
Pricing Methodology 33

Market based : market availability

Cost based : cost calculation/computation
Negotiated based: negotiation between two
parties
Dual price based : combination
Market Based 34

End-user products or services

Referring to market data and information
Commodity products
Finished goods and available in markets
Cost Based 35

In the middle of production process or supply

chain
Semi-finished products
Not available in markets
Derived from specific products or services
Negotiated Price 36

Agreed by transacting parties

Settled price or deal price
Reflecting transacting parties interests, business
conditions, terms, etc.
Willing to sell/render meets willing to
buy/receive
Supporting Documents 37

Agreement
Contract
Purchase order
Memo
Email correspondence
How is Price Computation? 38

1. Price level?
2. Type of products or services?
3. Market availability?
4. Internal comparable?
5. Which price?
6. Pricing methodology?
7. Supporting document?
Component of Price 39

Reflecting your cost or total cost

Expected profit or margin or mark-up
Pricing Method: Market Based 40

Market price
Market margin or profit
Suit to market condition
Resale price
Return on Sale (ROS)
Pricing Method: Cost Based 41

Production cost or rendering service cost

Cost level
Cost component
Cost driver
Cost allocation
Expected profit or mark-up
Traceable or untraceable cost
Pricing Terms 42

Rate
Fee
Premium and Discount
Rent
Tuition
Fare
Toll
Admission
Tariff
Duties, etc.
Pricing Unit 43

Project
Package
Bulk
Bundle
Job activity
Job order
Item or unit
Pricing and Transfer Pricing 44

Market Based = Comparable Uncontrolled Price,

Resale Price
Cost Based = Cost Plus or Net Cost Plus Method
Indirect transfer pricing method (Return on
Assets or Return on Capital Employed) must be
converted into pricing method/unit.
Arms Length Nature 45

1. The contractual terms of the transaction.

2. The functions performed by each of the parties to the
transaction, taking into account assets used and risks
assumed, including how those functions relate to the
wider generation of value by the MNE group to which the
parties belong, the circumstances surrounding the
transaction, and industry practices.
3. The characteristics of the property transferred or services
provided.
4. The economic circumstances of the parties and of the
market in which the parties operate.
5. The business strategies pursued by the parties. (OECD,
Action 8 10)
Ordinary Course of Business 46

Substance over form rule?

Independent party transaction?
Market perception?
Market structure?
Which markets?
Transfer Pricing Method 47

Market based = market situation = CUP

Cost based = company profile/condition
Cost reflecting your activities
Mark-up reflecting your functional profile
Cost Plus or Net Cost Plus
Arms Length Principle 48

Market Based = Market Price = ALP?

Cost Based
Cost = ALP?
Mark up = ALP?
Market Based Price Setting 49

Market data and information

Market condition
Market price projections
Market price data
Industry report
Cost Based Price Setting 50

Pricing policy
Historical data
Projection
Charges method
Payment time
Cost computation: component, driver, allocation, etc.
Price computation: mark-up, unit price, etc.
Be aware of your activities and functional profile
Arms Length Principle? 51

Are you aware of it?

Substance over form rule?
Five factors of comparability?
Pricing and Transfer Pricing?
Are you ready to apply it?
Segmentation 52
Allocation
Product
Function
Driver
Cost Classification

The separation of expenses into

different categories. For
example, cost classification in
economics might involve
categories of fixed, variable,
opportunity, production and sunk
costs. On the other hand,
accounting costs can be classified
as either direct or indirect for a
business.
Read more:
http://www.businessdictionary.co
m/definition/cost-
classification.html
Product costs are costs assigned
to the manufacture of products
and recognized for financial
reporting when sold. They include
direct materials, direct labor,
factory wages, factory
depreciation, etc.
Period costs are on the other
hand are all costs other than
product costs. They include
marketing costs and
administrative costs, etc.

53
Type of Cost 54

Direct Cost
Cost Traceable
Common
Cost
Non-
Traceable
Segmentation 55

Division/Unit/Entity Function

Product Location

Segmentation
Segmented by Product Lines 56
Segmented by Division 57
Segmented by Location 58
Pasal 9 ayat (3) PMK 213 :
Segmentasi 59

Dalam hal Wajib Pajak mempunyai lebih dari satu

kegiatan usaha dengan karakterisasi usaha yang
berbeda, dokumen lokal sebagaimana dimaksud
pada ayat (1) harus disajikan secara
tersegmentasi sesuai dengan karakterisasi usaha
yang dimiliki.
Segmentation : Transfer Pricing
(PMK-213) 60

Manufacturer Distributor Service

Toll Agent Share

Contract Commissionaire Contract

Licensed Buy-Sell Sophisticated

Fully fledged Fully fledged

 Price Setting 61
Ex-ante approach
Implementation
Applying arms length principle
Critical points
Strategic Pricing 62

Pricing and should play an integrative role in business

strategy. Pricing is not only part of marketing, but also
part of finance and competitive strategy. Done
correctly, pricing is the interface between those
activities the glue that holds them together. Superior
profitability is achievable only by finding and exploiting
synergies between customer needs and seller
capabilities synergies that produce high value for both
parties. Finding and exploiting such synergies is what
we call strategic pricing.
(Nagle and Holden, 2002)
Degrees of Conversion in Firms 63
Price Setting Point toward
Transaction Point 64
Budgeting
Segmenting
Price
Setting Pricing

Dealing/Negotiation
Revising Price
Negotiation Agreement

Monitoring
Evaluating
Transaction Revising

Evaluating
Historical data and information
Outcome
Testing Baseline for next year price setting
Comparable Uncontrolled Price
(CUP) 65

Unfortunately, many corporations do not use market-

based transfer pricing, not because they do not want
to, but because there are no market prices available.
This happens when the products being transferred do
not exactly match those sold on the market, or if they
are intermediate-level products that have not yet been
converted into final products, so there is no market
price available for them.

(Bragg, 2007)
CUP : Issues 66

Internal versus external

Nature of transaction
Market data and information
Timing
Agreement : contractual terms
Price Setting : CUP 67

Write contractual
terms in Monitor, evaluate,
Determine market
agreement based compare related
price (CUP)
on market data party prices to CUP
and information
Cost Plus / Resale Price 68

Internal versus External Comparable

Attributable cost : product cost / direct cost
Segmentation issues
Functional analysis (functions, assets, and risks)
Price Setting : Cost Plus / Resale
Price 69

Put the ALP's mark-up

Search comparable
Determine Product or margin (relative Transform into
mark-up (CP) /
Cost / Direct Cost value) into budget charges/rates/prices
margin (RP)
process
TNMM : Profit Level Indicator
(PLI) 70

PLI

Indirect Direct

Return on
Return on
Capital Return on Sales Full Cost Mark
Operating Assets
Employed (ROS) Up (FCMU)
(ROA)
(ROCE)
Price Setting : TNMM - Direct PLI 71

Put the ALP's mark-

Search comparable
Determine TNMM PLI up or margin Transform into
mark-up/margin
: ROS/FCMU (relative value) into charges/rates/prices
(relative value)
budget process
Price Setting : TNMM - Indirect
PLI 72

Calculate the ALP's

Search comparable mark-up or margin
Determine TNMM PLI Transform into
mark-up/margin (relative value) into
: ROS/FCMU charges/rates/prices
(relative value) absolute value and
put in budget process
Searching Comparable Margin /
Mark-up 73

Single Year
Year
Multiple Years

FY 20X6 Availability
Financial Data
financial data

Economic
Different
Circumstances
TP Life Cycle 74

Historical
data and
information

Outcome Price
testing (ex- Setting (ex-
post) ante)

Monitoring Supporting
Process Documents
Critical Points 75

Segmentation
Cost allocation
Cost driver
Pricing Formula
Agreement
Budget vs Actual
Comparable margin / mark-up:
Timing / year(s) comparison
Availability of financial data
Economic circumstances
Ex-ante : Years Comparison 76

Data from years following the year of the transaction

may also be relevant to the analysis of transfer prices,
but care must be taken to avoid the use of hindsight.
For example, data from later years may be useful in
comparing product life cycles of controlled and
uncontrolled transactions for the purpose of
determining whether the uncontrolled transaction is an
appropriate comparable to use in applying a particular
method. Subsequent conduct by the parties will also be
relevant in ascertaining the actual terms and conditions
that operate between the parties.

(Paragraph 3.74, OECD TPG)

Ex-ante : Business Strategy 77
An additional consideration is whether there is a plausible expectation
that following the business strategy will produce a return sufficient to
justify its costs within a period of time that would be acceptable in an
arm's length arrangement. It is recognised that a business strategy such
as market penetration may fail, and the failure does not of itself allow
the strategy to be ignored for transfer pricing purposes. However, if
such an expected outcome was implausible at the time of the
transaction, or if the business strategy is unsuccessful but nonetheless
is continued beyond what an independent enterprise would accept, the
arms length nature of the business strategy may be doubtful. In
determining what period of time an independent enterprise would
accept, tax administrations may wish to consider evidence of the
commercial strategies evident in the country in which the business
strategy is being pursued. In the end, however, the most important
consideration is whether the strategy in question could plausibly be
expected to prove profitable within the foreseeable future (while
recognising that the strategy might fail), and that a party operating at
arm's length would have been prepared to sacrifice profitability for a
similar period under such economic circumstances and competitive
conditions.

(Paragraph 1.63, OECD TPG)

Ex-ante : Transactional Profit
Split Method (1) 78

When a tax administration examines the application of the method

used ex ante to evaluate whether the method has reliably
approximated arms length transfer pricing, it is critical for the tax
administration to acknowledge that the taxpayer could not have known
what the actual profit experience of the business activity would be at
the time that the conditions of the controlled transaction were
established. Without such an acknowledgement, the application of the
transactional profit split method could penalize or reward a taxpayer by
focusing on circumstances that the taxpayer could not reasonably have
foreseen. Such an application would be contrary to the arms length
principle, because independent enterprises in similar circumstances
could only have relied upon projections and could not have known the
actual profit experience. See also paragraph 3.74.

(Paragraph 2.128, OECD TPG)

Ex-ante : Transactional Profit
Split Method (2) 79

Where the associated enterprises have determined the

conditions in their controlled transactions on a basis other
than the transactional profit split method, the tax
administration would evaluate such conditions on the basis of
the actual profit experience of the enterprise. However, care
would need to be exercised to ensure that the application of
a transactional profit split method is performed in a context
that is similar to what the associated enterprises would have
experienced, i.e. on the basis of information known or
reasonably foreseeable by the associated enterprises at the
time the transactions were entered into, in order to avoid
the use of hindsight. See paragraphs 2.11 and 3.74.

(Paragraph 2.130, OECD TPG)

Low Value-Adding Activities 80
Safe Harbour Margin / Mark-up
Safe Harbour Margin/ Mark-up (1) 81
Safe Harbour Margin/ Mark-up (2) 82
Terima kasih atas perhatiannya

transfer pricing is not an exact science

83
DISCLAIMER 84

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