Mengenal Istilah Arm’s Length Principle dalam konteks Transfer Pricing - ConTAXtual Eps 11

Summary

This video explores the 'Arm's Length Principle' in the context of transfer pricing, a critical concept for understanding tax implications in various transactions. It explains how multinational companies should conduct transactions between related parties as if they were independent to prevent tax manipulation. The principle, adopted globally including in Indonesia, mandates that prices or profits in related-party transactions must mirror those in independent dealings. The video also touches on the legal implications of non-compliance, such as corrections by tax authorities. Aimed at enhancing viewers' comprehension of transfer pricing and its regulatory framework.

Takeaways

• 📚 The video discusses the 'Arm's Length Principle' in the context of transfer pricing.
• 🔍 Transfer pricing is a method used to prevent tax minimization through manipulation of prices between related parties.
• 🌐 The Arm's Length Principle is widely adopted globally, including in Indonesia where it's known as 'principle of fairness and business rationality'.
• 🏢 It stipulates that transactions between related parties should reflect conditions similar to those between independent parties.
• 💼 The principle is designed to eliminate the influence of special relationships in transactions to prevent transfer pricing manipulation.
• 📖 The concept is detailed in Article 18, Paragraph 3 of the Indonesian Income Tax Law and its implementing regulations.
• ✅ If the principle is not followed, the Director General of Taxes has the authority to adjust costs or income based on transactions between unrelated parties.
• 🔄 The principle ensures that transactions between related parties are evaluated and compared using transactions between independent parties as a benchmark.
• 👍 The video encourages viewers to understand transfer pricing better and to like, subscribe, and enable notifications for more educational content.
• 🎥 The video is part of a series by DDTC Indonesia aimed at providing educational content on various tax-related topics.

Q & A

What is the main topic of the video?

The main topic of the video is the 'Arm's Length Principle' in the context of transfer pricing.

What is Transfer Pricing?

Transfer Pricing is the method by which the price of goods or services is set in transactions between related entities within an organization, potentially manipulated to minimize tax liabilities across different countries with varying tax rates.

What is the Arm's Length Principle?

The Arm's Length Principle is a guideline that requires transactions between related parties to be conducted at prices or profits that are comparable to those in transactions between independent parties.

Why is the Arm's Length Principle important in international business?

The Arm's Length Principle is important to prevent multinational companies from manipulating transfer pricing to reduce their overall tax burden by exploiting differences in tax rates among countries.

What does the term 'Armstrong's Principle' refer to in the context of the video?

In the video, 'Armstrong's Principle' is another term for the 'Arm's Length Principle', which is adopted by many jurisdictions worldwide to regulate transactions between related parties.

How is the Arm's Length Principle known in Indonesia?

In Indonesia, the Arm's Length Principle is more commonly known as 'Prinsip Kewajaran dan Kelaziman Usaha', which translates to the 'Fairness and Business Rationality Principle'.

What should transactions between related parties reflect according to the Arm's Length Principle?

According to the Arm's Length Principle, transactions between related parties should reflect how independent parties would transact with each other under similar conditions.

What is the purpose of comparing related party transactions to independent transactions?

The purpose of comparing related party transactions to independent transactions is to ensure that the transactions are conducted at fair market value and to eliminate any influence of special relationships that could lead to transfer pricing manipulation.

Where can the Arm's Length Principle be found in Indonesian tax law?

In Indonesian tax law, the Arm's Length Principle can be found in Article 18, Paragraph 3 of the Income Tax Law and its implementing regulations.

What authority does the Director General of Taxes have if the Arm's Length Principle is not applied?

If the Arm's Length Principle is not applied, the Director General of Taxes has the authority to correct costs or income based on transactions that would have occurred between independent parties without special relationships.

What is the final advice given to viewers regarding transfer pricing in the video?

The final advice given to viewers is to understand the concept of transfer pricing, and to like, subscribe, and turn on notifications for more videos from the DDTC Indonesia YouTube channel.