Transfer pricing benchmarking in Indonesia: selecting comparables a reviewer can assess

A transfer pricing benchmark should let a reviewer trace the conclusion back to the transaction, comparable evidence and calculation. An industry label and a spreadsheet of margins do not explain why independent businesses are sufficiently comparable to the tested activity.

This guide focuses on external company benchmarking where a transactional net margin method, or TNMM, has been justified. It is not a substitute for choosing the appropriate method. PMK 172/2023 requires that choice to reflect the transaction, the method’s strengths and weaknesses, the available reliable information and comparability. PMK 172/2023, Article 9(2).

The legal requirements below come from Indonesia’s regulation. The proposed reviewer records are practical recommendations. OECD guidance is identified separately.

Define the activity before searching for companies

Write a short search brief covering the transaction, functions performed, assets used, risks assumed, proposed tested party and profit-level indicator. Explain why those choices fit the actual business.

For example, “distributor” leaves unanswered whether the entity holds inventory, owns valuable brands, develops the market or bears customer credit risk. Those differences can affect whether another business is a useful comparable. PMK 172 requires examination of comparability characteristics and material differences, including whether reliable adjustments can address them. The tested party is the less complex party in functions, assets and risks, considering the method and the availability of the most reliable usable information. PMK 172/2023, Article 8(2)–(4).

Identify relevant uncontrolled transactions within the business before defaulting to an external database. If internal and external comparables have the same comparability and reliability, Article 8(8) gives preference to internal comparables. This is a conditional preference, not a declaration that every internal transaction is suitable.

Apply the local-comparable preference accurately

When external comparables from the tested party’s country and other countries have the same comparability and reliability, Article 8(9) gives preference to those from the tested party’s country. For an Indonesian tested party, this means Indonesia. PMK 172/2023, Article 8(8)–(9).

A domestic company is not automatically comparable. Conversely, the provision is not an absolute ban on foreign comparables. Record the local search, the reasons for rejecting unsuitable candidates, and why any wider geographic search is appropriate. Consider differences in market conditions and whether they materially affect the comparison.

That explanation matters more than simply stating that an “Asia-Pacific set” is customary. A regional search still needs evidence supporting the selected businesses and any adjustment.

Make screening decisions reproducible

Preserve the search date, database or public source, query criteria, geography, industry codes, financial periods and candidate identifiers. Record changes to the search, including why it was widened. Keep the original result set so that exclusions remain visible.

Quantitative filters narrow the review population; they do not settle functional comparability. Review business descriptions, segment information, ownership and related-party disclosures. A stock-exchange listing alone does not establish independence. If a database field is missing, treat that as an information gap rather than evidence that related-party transactions do not exist.

The following is a hypothetical review record for a routine distribution activity. The candidates and facts are invented for illustration, not taken from a real benchmark.

The decisions illustrate the record structure; they do not prescribe a universal filter. Add the reviewer, review date, unresolved questions and final disposition. Article 8(3) requires identifying reliable comparables, analysing differences, making appropriate adjustments and selecting comparables; this record helps explain those steps. PMK 172/2023, Article 8(3).

Investigate unusual results before excluding them

A loss or unusually high margin can signal a comparability problem, but the number alone does not explain the cause. Investigate restructuring, start-up conditions, exceptional items and differences in risk or business activity.

OECD guidance advises examining the circumstances of loss-making comparables rather than applying an overriding inclusion or exclusion rule. This is guidance, not a separate Indonesian safe harbour. Apply Indonesia’s comparability requirements to the actual facts. OECD Transfer Pricing Guidelines 2022, paragraphs 3.63–3.66.

Match the financial data to the analysis

PMK 172 starts with single-year comparable data. Multiple-year data may be used where they improve comparability. Comparable information should be available and closest to the time of price determination or the transaction. A routine three-year average is therefore not a universal Indonesian requirement. Explain the period selected and what information was available at the relevant time. PMK 172/2023, Article 12(2)–(4).

Reconcile the tested result to the accounts and apply consistent definitions to the comparables. Where business activities have different characteristics, Article 30(3) requires segmented presentation in the local file. An entity-wide margin can obscure the activity being tested. PMK 172/2023, Article 30(3).

Hypothetical calculation: an appropriately identified distribution segment has revenue of Rp100 billion and operating costs of Rp96 billion, producing operating profit of Rp4 billion. Its operating margin on sales is 4 ÷ 100 = 4%. This is only a calculation example. It establishes neither the suitability of that indicator nor an arm’s length result. The reviewer must check segment allocation, accounting treatment and the comparable results.

Use the Indonesian range rules

The regulation distinguishes an arm’s length point from a range and specifies how different numbers of comparable results are treated.

Source: PMK 172/2023, Article 12(5)–(6).

Hypothetical range example: if the completed analysis supports two different comparable margins of 3% and 5%, the range rule gives 3%–5%. This does not show that two suitable comparables can always be found or that a two-company search is sufficient. Comparability and reliability must be established first.

For larger sets, preserve the observations, formula and quartile convention so another reviewer can reproduce the result. A software default should not silently determine the method. Where the tested result is outside the arm’s length point or range, Article 12(7) addresses using the point, the most appropriate point within the range, or the median when that most appropriate point cannot be determined. Do not describe the median as compulsory in every analysis. PMK 172/2023, Article 12(7).

Assemble the review package

A useful handoff contains the transaction and method rationale, original search results, accept/reject/pending log, source documents, reconciled financial inputs, adjustments, formulas and conclusion. It also identifies unresolved matters instead of burying them in a final narrative.

Software can assist with extracting information, linking sources, drafting explanations and performing calculations. Professional judgment remains necessary for functional comparability, source reliability, adjustments and the final conclusion. Librantic’s public workflow places review and report sign-off with tax firms. Librantic for tax firms.

Does your firm prepare and sign Indonesian TP documentation? Apply to partner with Librantic to discuss how document preparation can support your review process.

Sources:

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

OECD Transfer Pricing Guidelines 2022, 20 January 2022, paragraphs 3.63–3.66.

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