Page 106 - SUSTAINABILITY ISSUES & COVID-19

15 Analysis of Transfer Pricing Conducted

by Company xxx and Its Impacts on the

Calculation of Corporate Income Tax

Gabriel

EXTENDED ABSTRACT

PURPOSE
This study aims to analyze transactions conducted by Company XXX with the related parties (transfer pricing), to solve
several research questions below:
1. Is the transfer pricing practice carried out by Company XXX is in accordance with the terms stated in the taxation
regulations in force in Indonesia?
2. Is there any exposure in a tax audit of the transfer pricing practice carried out by Company XXX?
3. How does the impact of transfer pricing practices carried out by Company XXX to the calculation of corporate
income tax?

STUDY DESIGN/METHODOLOGY/APPROACH

Field research was conducted to obtain primary data by visiting directly to Company XXX in order to obtain data and
information needed for research. Field research consists of two activities, which are interviews and observations.
Interview is a data collection technique that is done by way of question and answer directly with the management
of PT. XXX to obtain information related to issues being investigated such as company history, company activities,
company structure, vision and mission.

Observation is a data collection technique that is done by directly observing the company’s activities in order to
obtain a clearer picture of the problem to be examined. The observation used is observation without participation,
ie the observer is not a member of the group under study, so that it does not interfere with the company’s operating
performance.

Literature study is carried out by reading and studying the literature relating to the problems discussed in research, and
the results are used to compile a literature review. The results of library research can be used to compare theories and
practices applied by companies to solve problems that occur.

FINDINGS

The authors conducted a comparative analysis of the transactions of COMPANY XXX with related parties, and the results
show that those transactions with related parties met the arm’s length principle. However, the payment of management
fee to Company PPP as a related party, its existence and benefits could not be proven to tax auditors in the 2014 tax
audit, which shows that the transaction does not fulfill the existence and benefit criteria. Based on the facts that have
been published above, the autor concludes that the payment of management fee to a related party does not comply
with tax regulations in Indonesia.

According to the results of the tax audit of Company XXX conducted in 2010 for the 2008 tax year, and examining
the 2014 tax for the 2012 tax year, provided two lists of transactions that were corrected by the tax inspector, which
are payment of royalties to SSS Corp. and payment of management fee to Company PPP. The tax auditor agreed that
Company XXX could not prove the existence and benefits of the transaction, so the tax auditor assumed that this
transaction is a disguised dividend and must be corrected.

International Conference on Sustainability 105
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