Indonesia's Directorate General of Taxation (DGT) has published Regulation No. PER-17/PJ/2020 on procedures for the application, implementation, and evaluation of Advance Pricing Agreements (APAs). The regulation is effective from 17 September 2020 and replaces the prior regulation on APAs issued in 2010, Regulation No. PER-69/PJ/2010.  

Regulation No. PER-17/PJ/2020 includes that taxpayers may apply for an APA based on:

• taxpayer's own initiative for requesting a unilateral or bilateral APA; or
• written notice from the DGT in connection with a bilateral APA application submitted by foreign taxpayers to the competent authority of a tax treaty partner.

When making an APA request, it is provided that the proposal for determining the transfer pricing in the APA application must be made based on the arm's length principle and that the proposal may not result in the taxpayer's profit rate being less than the profit rate reported in the annual tax return for the three tax years prior to the year an APA application is filed. It is also provided that applications for bilateral APAs may not be submitted later than the start of the period covered by the APA.

With respect to the profit rate condition, it is provided that the condition is considered met if the lowest profit rate projected during the APA period is greater than or equal to the lowest profit rate in the prior three years. For this purpose, the profit rate is the ratio between profit before tax or net commercial income and business turnover, or the ratio between profit before tax or net commercial income and total expenses.  

It is further provided that in the event that an APA application is submitted by a taxpayer whose business is negatively affected by the COVID-19 pandemic, the projected profit rate is determined in accordance with adjustments for normal conditions provided in an attachment to the regulation.