Transfer Pricing is a very relevant issue with the Tax Management, many practitioners who live identify Transfer Pricing with Tax Planning or Tax Management

. Transfer Pricing is derived from Transfer Price is often interpreted as the value attached to the transfer of goods and services in a transaction between parties who have a special relationship.


Transfer Pricing may occur either in a condition which is very simple to the very complex conditions, this depends on the objectives of the management. But there is an ideal condition to be met in order to run optimally, according Govindrajan ideal conditions to be met are: • Competent People; any manager interested in addressing this issue which has long-term vision, there is also a strong staff and competent in conducting negotiations; • Good Atmosphere; manager must take profitability into consideration factors and as an important goal; • A Market Price; The ideal Transfer Pricing is established market price and the same normal (quantity, delivery time, variety) with goods that are transferred; • Freedom of Source; the alternatives that can be chosen by decision makers; • Full Flow of Information; the flow of good information so that all possible alternatives that can be known. • Negotiation; must have a good mechanism in negotiating between business units. B. According to the OECD Transfer Pricing. Considering the application of transfer pricing is a matter largely of multinational companies and with the interests of some countries, the OECD more attention to this problem by conducting a comprehensive study. The results of the study was stated in a report known as the OECD Transfer Pricing Guidelines which contains the instructions handling of transfer pricing for member countries of OECD. Based on the OECD's guidelines can be known about the main principles of the Transfer Pricing, which is that there are two things that is affiliated or related parties and the fairness of prices or arm's length principle. Both principles must be accumulatively fulfilled in order to enter the category of transfer pricing that is acceptable under these guidelines. • Affiliate, in a transfer pricing must be at least two parties are parties to a transfer or the transferor and the party receiving the transfer or the transferee. The two parties must be from an affiliate or have a special relationship. • Arm's Length Principle; is a reason. An inter-affiliate transactions in connection with transfer pricing, should be within a reasonable limit or arm's length. Impropriety of a transaction which multinational companies can give bad impact to the global economy. These distortions would lead to macroeconomic instability of an equilibrium for a particular commodity is transferred. In article 9 of the model tax treaty drawn up by the OECD noted that: "When conditions are made or imposed between two associated enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have Accrued to one of the enterprises, but, by reason of those conditions, have no Accrued, may be included in the profits of that enterprises and taxed accordingly ". Explicitly explained that when the transactions occur between companies that have a special relationship is the condition of the transaction must be equal to the transactions between independent parties, and if no match can be corrected or adjusted. C. Transfer Pricing According to Indonesia Taxation Law. Transfer Pricing fiscal terms can be interpreted as an attempt to divert income, tax base and / or fees from a company to one or more other firms through inter-company transactions that have a special relationship, with a view to pressing global tax payable by companies it. Tax requires that transactions conducted by the taxpayer is a transaction conducted by the parties freely, resulting in price or fair value. Therefore, under Article 18 (3) Income Tax Law authorizes the Directorate General of Taxes for re-calculating the amount of income tax payers and / or cost, if there is a special relationship between the parties that deal. Based on Article 18 (4) Income Tax Act, considered to have a special relationship if: a. Taxpayers have a direct investment or indirectly lowest 25% on other payers, or the relationship between payers with the inclusion of the lowest 25% in two or more payers, as well as the relationship between the two payers or more of the latter; or b. Taxpayers over other payers or two or more payers are under the same control either directly or indirectly; or c. There is a good family relationship in blood or by marriage and a straight line or laterally one degree. D. Purpose or motivation Transfer Pricing in Indonesia Based on the research team from the UN UNTC year 1985, the motivation to do transfer pricing in Indonesia is as follows: a. Reduction of the tax object (mainly income tax), b. Easing the effects of foreign ownership restrictions, c. Decrease the influence of depreciation of the rupiah, d. Strengthening the demand or the price increase protection against competing imports, e. Securing the company of a claim for compensation or welfare of employees and environmental concerns f. Minimize the risk of uncertainty over the business activities of foreign companies. Meanwhile, according to John Dunning in the book "Multinational Enterprises and the Global Economy", motivated transfer pricing is divided into two internal and external motivation. Internal motivation: a. Reducing global tax liability. b. The need to improve the performance of control, coordination and flow of cash income from overseas companies. c. Advancing the company's strategic goals. External motivation a. Avoid or reduce tax rates b. Reduce the risk of economic, political and foreign exchange and c. Prevent or reduce restrictions on capital repatriation or dividends for the host country. E. The forms and Instrument Transfer Pricing The forms and the possible presence of transfer pricing practices may include: a. Buying and selling price of goods that are not reasonable that reported by the taxpayer, b. Unfair imposition of administrative costs and general expenses are allocated to the Central Office, c. Charging excessive interest on loans granted by shareholders' capital structure is skewed to the financing of the loan rather than with their own capital (thin capitalization), d. Charging fees for the payment of commissions, royalties, licenses, service manager, technical services or other services firms in the state despite continuing losses from year to year, e. Large dividend payments when the company reported a profit, f. Property sales prices that companies are not fair to the shareholders. g. Transaction prices of goods with foreign parties through a third party who has no business substance by using tax heaven countries and treaty shopping. h. Reinvoicing center i. Inter-company loans j. Allocation of shared costs F. Testing Method fairness Transfer Pricing a. Comparable Market Price Method / Comparable Uncontrolled Price Method (CUP) These methods take into account the fair market price by comparing the price of transactions between the parties having a special relationship with price taken into account transactions with other parties who have no special relationship to the same item, same or similar. b. Minus Sales / Resale Price Method / Selling Price Minus (RPM) Equity transfer price is approached by the sales price reductions to people who did not have a special relationship with a mark-up is reasonable. This type of transfer pricing is widely used in companies engaged in the trading business as a distributor, retailer, etc.. c. Plus Sales Price Method (Cost Plus Pricing Method / C + M) This method of approaching equity transfer price by adding mark-ups at reasonable cost of the transfer. This approach is commonly used in the delivery of intermediate goods (semi-finished product) or one group member as a subcontractor of the other. d. Comparable Profit Method (Comparable Profit Method / CPM) This method by comparing the financial statements are transactions with parties having a special relationship with another party transactions with independent parties. G. Transfer Pricing-Fighting Instruments a. Examination b. Tax Treaty - Harmonization of International Taxation c. Exchange of Information d. APA (Advance Pricing Arrangement)