The Ministry of Finance through the Directorate General of Taxation (DGT) plans to develop an Advance Pricing Agreement (APA) as a tax instrument to prevent double taxation. The plan is aimed at improving business certainty in Indonesia and convince investors in accordance with the direction of President Joko Widodo.
The tax instrument is developed by negotiation in advance through a Mutual Agreement Procedure which discusses about cross-border corporate transactions or affiliated transactions.
APA in fact has started to be applied since 2015, but to date, only a few companies utilize it. One of the reasons is because business players has not believed that DGT is able to manage APA in accordance with international standards.
To realize such plan, the government needs to amend Regulation of the Minister of Finance No. 7/PMK.03/2015 regarding Procedure for the Formation and Implementation of Advance Pricing Agreement.