Methods for Determining Arm’s Length Transfer Prices

Indonesia’s Directorate General of Taxes released an infographic on 2 November 2025 outlining the application of methods to determine arm’s‑length transfer prices. The visual guide provides practical steps for companies engaged in intra‑group transactions. It aims to assist taxpayers in calculating prices that comply with the arm’s‑length principle.

The infographic covers three primary methods: price‑comparison (Comparable Uncontrolled Price), resale price, and cost‑plus, each relying on market data or production costs. Selection of a method depends on the availability of comparable data and the nature of the transaction. When comparable data are lacking, taxpayers may resort to alternative approaches such as the Transactional Net Margin Method or Profit Split, as permitted by tax regulations.

Applying these guidelines enables companies to prepare adequate documentation and reduce the risk of tax disputes. Consistent methodology also assists tax authorities in objectively assessing transfer‑price reasonableness. Overall, this can streamline audit processes and strengthen fiscal compliance.