OECD´s Update on Country-by-Country Report and current prevailing law in Indonesia

     

​A significant update in the new guidance addresses the treatment of dividend payments in CbCR. It is now confirmed that dividend payments from constituent entities are excluded from the ‘Income’ and ‘Profit/Loss before Income Tax’ accounts in CbCR. 

    

Dividend payments must be treated consistently across tax jurisdictions. If dividend is paid to a constituent entity, the constituent entity must exclude it from its income and profit before tax (PBT) calculation. In addition, if profits from other constituent entity are included in PBT, it should be treated as dividend and excluded accordingly.   

      

​BEPS Action 13 also requires MNEs to list parent legal entities and constituent entities that are Permanent Establishments (PE) in the CbCR based on their tax jurisdiction. 

      

OECD provides flexibility for MNEs in customizing their CbCR to align with their internal accounting cycles. It offers two approaches to ensure consistent reporting: 

    

In Indonesia, the latest regulation on CbCR is incorporated in the Minister of Finance (MoF) Regulation No. PMK-172. The threshold to create CbCR refers to the parent entity of a business group with a minimum consolidated gross turnover of 11 trillion Rupiah or 750 million Euro in the tax year preceding the reported tax year.

      

PMK-172 does not change the threshold amount of consolidated gross turnover, but amends that the threshold referred to applies to the tax year preceding the tax year of filing the CbCR.

     

PMK-172 does not emphasize the conversion rate used to calculate the consolidated gross turnover for the parent entity. Appendix C of PMK-172 only offers an example using the rate of 1 January 2023 for the Fiscal Year 2023. This will potentially lead to disputes between taxpayers and tax authorities.

      

Indonesia’s CbCR template mirrors the template provided by the OECD. In Article 31 of PMK-172, the CbCR must contain a list of business group members, main business activities of all business group members, income statement, stated capital, accumulated earnings, number of employees, and tangible assets other than cash and cash equivalents.