The benefit test for related-party services: evidence to prepare in Indonesia

A management fee invoice shows that a charge was raised. A contract describes the agreement. Neither answers every question about the work actually performed, the recipient’s need, the economic benefit or possible duplication.

For service transactions influenced by a special relationship, PMK 172/2023 requires preliminary steps that include proving these elements. The benefit test is part of that assessment. Finding a comparable mark-up does not complete the analysis. PMK 172/2023, Article 4(5)–(6) and Article 13(1).

Start with the work received by the Indonesian entity

Describe services by activity, rather than only by the invoice label. For “regional management support”, for example, separate procurement support, production planning, staff training and shareholder administration. Record who performed the work, when, who received it and how the output was used.

This helps the reviewer identify activities that provide a service to the recipient and those requiring different treatment. PMK 172/2023 specifically addresses shareholder activities, including examples involving the parent’s administration and reporting obligations. A group allocation policy does not establish that all head-office costs can be charged to subsidiaries. PMK 172/2023, Article 13(2).

Assemble evidence for each preliminary requirement

The first column below summarises Article 13(1). The evidence column contains practical suggestions; the regulation does not prescribe the same document type for every service.

Legal basis: PMK 172/2023, Article 13(1) and (9). The absence of a ticket or timesheet does not automatically establish that no service occurred. Review the evidence as a whole, taking account of the work’s nature. Equally, a large number of emails does not automatically establish a benefit.

Explain the benefit in concrete terms

Compare these two hypothetical explanations.

“Regional support improved the company’s efficiency” does not explain the activity or who used its output.

“The regional team reviewed component specifications for the second-quarter purchasing plan. Local procurement used the review to evaluate three supplier offers. Available documents include the review request, technical report, evaluation minutes and purchase approval” gives the reviewer a clearer route through the evidence.

The second statement still needs support. Do not add a savings figure without a basis for calculating it. Under PMK 172, economic benefit is not limited to an immediately visible profit increase: it also covers protecting the commercial position and meeting other business needs. PMK 172/2023, Article 13(9).

Connect the service evidence to the charge

Once the service scope is understood, examine the provider’s costs and the charging basis. A file that proves activity but does not connect that activity to the invoice amount still leaves questions unanswered.

A practical sequence is:

1. Identify the costs included in the service cost pool and reconcile them to the provider’s financial records.
2. Separate activities that are not relevant to the recipient, including identified shareholder activities.
3. Determine whether costs can be charged directly to a particular recipient.
4. For shared costs, explain the allocation key and how the allocation data were obtained.
5. Separate the assessment of the cost base from whether the mark-up or other remuneration is arm’s length.
6. Reconcile the calculation to the invoice and the Indonesian entity’s books.

This is a suggested working-paper structure. The transfer pricing method must still reflect the transaction’s characteristics, method reliability, comparable data and comparability. PMK 172/2023, Article 9(2).

Hypothetical allocation example, not an arm’s length pricing conclusion: after reviewing activities and costs, an IT support cost pool totals IDR1.2 billion. If active users are an appropriate allocation key and the Indonesian entity accounts for 20% of users receiving the service, its share before mark-up is IDR240 million.

The calculation of 20% × IDR1.2 billion does not prove that active users are an appropriate key, every cost is chargeable or a particular mark-up is justified. The reviewer still needs to assess the service, recipients, usage data and pricing method. Where entities have substantially different service needs, a single user-count allocation can conceal material differences.

Do not assume a 5% mark-up automatically applies in Indonesia

The OECD Guidelines contain a simplified approach for low value-adding intra-group services. That approach does not itself create an Indonesian safe harbour. Indonesia’s transfer pricing country profile, published by the OECD and updated in May 2025, states that rules establishing the simplified approach had not been introduced. Do not assume that a 5% mark-up automatically complies without an applicable Indonesian basis. Indonesia country profile, question 24.

The OECD also issued a consultation draft revising Chapter VII in 2026, with comments invited from 1 June to 22 July. It expressly remains a proposal rather than adopted guidance on which taxpayers should rely. This article does not use it to replace PMK 172/2023. OECD 2026 consultation document, pages 1–3.

Deal openly with missing evidence

Maintain an open-question list: which claim lacks support, who owns the information, what evidence has been requested and when it will be reviewed. Preserve original documents and date additional explanations accurately. Do not create work products or correspondence that appear to originate in the transaction period when they do not.

Failure to establish the transaction through the preliminary steps has a substantive consequence: Article 14 states that the transaction does not meet the arm’s length principle. A mark-up range cannot replace missing proof. PMK 172/2023, Article 14.

Software can help connect claims to sources and prepare calculations. Whether a service was needed, beneficial or duplicative still requires professional judgment. Librantic’s model places review and report sign-off with tax firms. How Librantic works.

Need to assess the evidence supporting management fees or related-party services? Request a consultation and describe the services, tax year and documents already available.

Sources:

PMK 172 Tahun 2023, 29 December 2023. Text also checked against the DJP-hosted English version. The Indonesian legal text governs.

OECD Indonesia transfer pricing country profile, updated May 2025, question 24.

OECD Chapter VII consultation document, consultation period 1 June–22 July 2026. A proposal, not adopted guidance.

Sources reviewed on 12 September 2026. Librantic workflow information refers to the public pages linked in the article.