Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Indonesia

Indonesia has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) that can be met in the absence of rulings being issued and no recommendations are made.

Indonesia can legally issue one type of rulings within the scope of the transparency framework.

In practice, Indonesia issued no rulings within the scope of the transparency framework. 15 requests for unilateral APAs, including 14 requests mentioned in the prior year report, have been received from taxpayers until 31 December 2017, 12 of the requests are still under consideration by Directorate General of Taxes.1

As no rulings were issued, no exchange of information was required. No peer input was received in respect of the exchanges of information on rulings received from Indonesia.

1. Two ruling requests have been withdrawn by the taxpayers, one ruling request was denied.

Introduction

576.  This peer review covers Indonesia’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

577.  Indonesia can legally issue one type of rulings within the scope of the transparency framework: cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles. In Indonesia, APAs are issued by the Directorate of International Taxation, a unit allocated within the Directorate General of Taxes (Indonesian “tax administration”), through a decree.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

578.  For Indonesia, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

579.  In the prior year peer review report, it was determined that the Indonesian tax administration’s undertakings to identify past rulings and all potential exchange jurisdictions in the absence of any past rulings being issued were sufficient to meet the minimum standard. As the implementation in this regard remains unchanged and Indonesia did not issue any past rulings it is determined that the Indonesian tax administration’s implementation continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

580.  For Indonesia, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

581.  In the prior year peer review report, it was determined that Indonesia’s existing system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. The implementation in this regard remains unchanged and Indonesia did not issue any future rulings. Therefore the system to identify future rulings continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

582.  In the prior year peer review report, it was determined that Indonesian tax administration’s review and supervision mechanism was sufficient to meet the minimum standard. The Indonesian tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

583.  Indonesia has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

584.  Indonesia has the necessary domestic legal basis to exchange information spontaneously. Indonesia notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

585.  Indonesia is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 65 jurisdictions.1

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

586.  The prior year peer review report noted that Indonesia has put in place a process to exchange information on rulings in accordance with the form and timelines required by the transparency framework. As no rulings within the scope of the transparency framework have been issued in practice, Indonesia was not required to complete any exchanges of information and there is no data to report on the timeliness of exchanges.

Conclusion on section B

587.  Indonesia has the necessary legal basis and administrative process in place for the spontaneous exchange of information on rulings. Indonesia has met all of the ToR for the exchange of information process that can be met in the absence of rulings being issued and exchanged in practice and no recommendations are made.

C. Statistics (ToR IV)

588.  As there were no rulings required to be exchanged by Indonesia for the year in review, no statistics can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

589.  Indonesia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Note

← 1.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Indonesia has bilateral agreements with Algeria, Armenia, Australia, Austria, Bangladesh, Belgium, Brunei Darussalam, Bulgaria, Canada, China (People’s Republic of), Croatia, Czech Republic, Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Hong Kong, Hungary, India, Iran, Italy, Japan, Jordan, Korea, Kuwait, Lao People’s Democratic Republic, Luxembourg, Malaysia, Mexico, Mongolia, Morocco, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russia, Seychelles, Singapore, Slovak Republic, South Africa, Spain, Sri Lanka, Sudan, Suriname, Sweden, Syria, Chinese Taipei, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Viet Nam.