Transfer Pricing Audits in Indonesia: Under-invoicing Crackdowns Raise the Stakes for Multinationals (Indonesia Transfer Pricing Audit)

The compliance baseline has been reset by Minister of Finance Regulation No. 172 of 2023 (PMK 172/2023). It came into force on 29 December 2023 and took full effect for Tax Year 2024 documentation. PMK 172/2023 consolidated three earlier rules: PMK 213/PMK.03/2016 on transfer pricing documentation, PMK 49/PMK.03/2019 on the Mutual Agreement Procedure, and PMK 22/PMK.03/2020 on ALP and Advance Pricing Agreements. In practice, that consolidation matters because it creates one “rulebook” for documentation, audit expectations, and dispute pathways, while staying anchored to Article 18 of the Income Tax Law and aligned with the OECD Transfer Pricing Guidelines 2022 and BEPS Action Plan framing.

Why Under-invoicing Signals Can Escalate Audit Risk

Under-invoicing is often discussed as a trade and customs issue, but it can intersect directly with transfer pricing when invoice values are set below the true economic value and profits shift out of Indonesia. IKPI describes under invoicing as reporting a transaction value lower than the real economic value in an invoice, contract, customs declaration, or other tax document, with potential impacts on import duty, import VAT, Income Tax Article 22 on imports, output VAT, and taxable income. At the same time, IKPI stresses that data gaps do not automatically prove fraud. Differences can arise from freight, insurance, exchange rates, product quality, formula pricing, transaction timing, Incoterms, or different export-import recording bases, so corrections that do not examine contracts and supporting documents can be weak on proof.

Still, enforcement tools are getting sharper, and that changes how multinationals should think about a transfer pricing audit in Indonesia. Indonesia Business Post reports the Finance Minister saying AI monitoring and cross-border data uncovered 10 firms under-invoicing trade values. Separate research from Universitas Andalas shows how “mirror statistics” can be used to create risk-based priorities: from 77 country-year observations, there were 13 “strong” and 7 “moderate” financial indications, meaning 20 observations met criteria to enter an audit priority list. The same analysis emphasizes that aggregate statistics are only a red flag; final proof comes after document audit steps, including invoices, sale contracts, bills of lading, export declarations (PEB), partner-country import documents, payment evidence, transaction dates, international reference prices, and related-party relationship information.

On the tax side, audit triggers increasingly focus on both thresholds and execution quality. As of 2025, comprehensive documentation obligations apply when taxpayers engage in related-party transactions (domestic or cross-border), record gross annual revenue of at least 50 billion rupiah (US$3 million), or exceed related-party transaction thresholds of 20 billion rupiah (US$1.23 million) for goods or 5 billion rupiah (US$307,000) for services. They can also apply when dealing with lower-tax jurisdictions or when the group is an ultimate parent with consolidated turnover exceeding 11 trillion rupiah (US$675 million) for Country-by-Country Reporting purposes. Indonesia uses a three-tier model (Master File, Local File, and CbCR), and documentation must be ready by the time the annual corporate return is filed, then submitted within 30 days if requested. In parallel, certain sectors such as mining and oil and gas are highlighted as higher-risk due to export pricing complexity and under-invoicing monitoring, making proactive price-setting analysis and audit-ready documentation a practical necessity.