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Transfer Pricing Agreement

Transfer Pricing Agreement Template for Indonesia

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Key Requirements PROMPT example:

Transfer Pricing Agreement

"I need a Transfer Pricing Agreement between our Indonesian manufacturing subsidiary and our Singapore-based parent company, covering the export of electronic components, to be effective from January 2025, with specific attention to cost-plus pricing methodology and Indonesian documentation requirements."

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Document background
A Transfer Pricing Agreement is essential for businesses operating in Indonesia with related-party transactions, whether domestic or international. This document becomes necessary when companies within the same group engage in inter-company transactions involving goods, services, intellectual property, or financing arrangements. It establishes approved methodologies for pricing these transactions in compliance with Indonesian regulations, particularly PMK-213/PMK.03/2016 and the arm's length principle. The agreement helps companies demonstrate compliance with Indonesian transfer pricing rules, minimize tax risks, and provide a framework for consistent pricing practices. It's particularly crucial given Indonesia's increased scrutiny of transfer pricing arrangements and the implementation of BEPS Action Plans.
Suggested Sections

1. Parties: Identification of the related parties entering into the agreement, including their complete legal names, registration numbers, and addresses

2. Background: Context of the agreement, nature of the related party relationship, and business rationale for the transactions

3. Definitions: Detailed definitions of technical terms, pricing methods, and key concepts used in the agreement

4. Scope of Agreement: Detailed description of transactions covered, including products, services, or intellectual property

5. Transfer Pricing Methodology: Specified pricing method(s) chosen and justification (e.g., CUP, RPM, Cost Plus, TNMM, or Profit Split)

6. Calculation and Adjustment Mechanisms: Detailed procedures for calculating prices, margins, and making periodic adjustments

7. Documentation Requirements: Specific documentation to be maintained by parties as per Indonesian regulations

8. Compliance Obligations: Parties' obligations regarding transfer pricing documentation, reporting, and regulatory compliance

9. Term and Termination: Duration of the agreement and conditions for termination

10. Representations and Warranties: Standard warranties regarding compliance with laws and accuracy of information

11. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction details

Optional Sections

1. Advanced Pricing Agreement Provisions: Include when parties plan to seek APA approval from tax authorities

2. Mutual Agreement Procedure: Include when cross-border transactions involve countries with tax treaties with Indonesia

3. Force Majeure: Include for long-term agreements or when significant external factors might affect pricing

4. Benchmarking Procedures: Include when regular comparative analysis is required for pricing validation

5. Intellectual Property Provisions: Include when transactions involve IP rights or licensing

6. Cost Contribution Arrangements: Include when parties share development costs or risks

7. Currency and Exchange Rate Provisions: Include for international transactions with currency fluctuation risks

Suggested Schedules

1. Schedule A - Covered Transactions: Detailed list and description of all transactions covered under the agreement

2. Schedule B - Pricing Methodology Details: Technical details of pricing calculations, including formulas and examples

3. Schedule C - Functional Analysis: Analysis of functions performed, assets used, and risks assumed by each party

4. Schedule D - Documentation Templates: Templates for required documentation and reporting

5. Schedule E - Benchmark Studies: Comparative analysis and market data supporting the chosen pricing methodology

6. Appendix 1 - Compliance Calendar: Timeline for various compliance obligations and deadlines

7. Appendix 2 - Contact Details: List of key personnel responsible for transfer pricing compliance

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Affiliated Parties
Arm's Length Principle
Advanced Pricing Agreement
Benchmarking Analysis
Comparable Uncontrolled Price
Controlled Transaction
Cost Plus Method
Country-by-Country Report
Functional Analysis
Group
Independent Transaction
Local File
Master File
Mutual Agreement Procedure
OECD Guidelines
Operating Margin
Parent Entity
Profit Level Indicator
Related Party
Resale Price Method
Risk Analysis
Subsidiary
Tax Authority
Transfer Pricing Documentation
Transfer Pricing Method
Transactional Net Margin Method
Profit Split Method
Tested Party
Uncontrolled Transaction
Working Capital Adjustment
Contemporaneous Documentation
Comparability Analysis
Interquartile Range
Service Fee
Management Fee
Royalty
Business Restructuring
Permanent Establishment
Documentation Package
Compliance Period
Reference Period
Adjustment Mechanism
Material Change
Base Price
Compensating Adjustment
Control Relationship
Economic Ownership
Financial Indicators
Intangible Property
Principal Company
Tax Year
Value Chain Analysis
Clauses
Definitions
Interpretation
Scope
Transfer Pricing Methodology
Pricing Adjustments
Documentation Requirements
Compliance Obligations
Information Exchange
Confidentiality
Record Keeping
Audit Rights
Risk Allocation
Force Majeure
Representations and Warranties
Term and Termination
Dispute Resolution
Governing Law
Severability
Amendments
Notices
Assignment
Entire Agreement
Anti-Corruption
Tax Compliance
Reporting Requirements
Review and Adjustment
Data Protection
Regulatory Compliance
Advanced Pricing Arrangements
Mutual Agreement Procedures
Change in Law
Financial Responsibilities
Indemnification
Intellectual Property Rights
Currency and Exchange
Computation Methods
Performance Standards
Breach and Remedies
Relevant Industries

Manufacturing

Technology

Pharmaceutical

Automotive

Consumer Goods

Financial Services

Energy and Resources

Telecommunications

E-commerce

Professional Services

Chemical Industry

Retail

Agriculture

Mining

Relevant Teams

Tax

Finance

Legal

Compliance

Risk Management

Internal Audit

Treasury

Financial Planning & Analysis

International Tax

Transfer Pricing

Corporate Affairs

Accounting

Relevant Roles

Tax Director

Chief Financial Officer

Transfer Pricing Manager

International Tax Manager

Finance Director

Tax Compliance Manager

Corporate Controller

Financial Planning Manager

Legal Counsel

Tax Partner

Head of Tax

Finance Manager

Compliance Officer

Risk Management Director

Industries
PMK-213/PMK.03/2016: Ministry of Finance Regulation on Transfer Pricing Documentation and Country-by-Country Reporting requirements, implementing BEPS Action 13 in Indonesia
PER-32/PJ/2011: Director General of Tax Regulation concerning Transfer Pricing Guidelines, including the application of arm's length principle and transfer pricing methods
Law No. 36/2008: Indonesian Income Tax Law, particularly Article 18 which provides the legal basis for transfer pricing adjustments
PER-43/PJ/2010 as amended by PER-32/PJ/2011: Implementation of arm's length principle, transfer pricing methods, and documentation requirements
PMK-22/PMK.03/2020: Ministry of Finance Regulation on Mutual Agreement Procedures (MAP) for resolving transfer pricing disputes
Law No. 7/2021: Harmonization of Tax Regulations (HPP Law) which includes updates to transfer pricing provisions
OECD Transfer Pricing Guidelines: International guidelines adopted by Indonesia as reference for transfer pricing practices and methods
PER-22/PJ/2013: Guidance on transfer pricing audits and verification procedures
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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