Strategizing Multinational Tax Risks

The Indonesian Ministry of Finance has issued updated MAP guidelines, evidencing focus by the Indonesian Tax Office (ITO) on multilateral dispute resolution.  This regulation is the third MAP related guidance, with the inclusion of additional restrictions.  A link to KPMG’s Tax News Flash is provided for reference:

Click to access Tax-News-Flash-January-2015.pdf

Key summary:

• The MAP process will be terminated when the Indonesian tax court “deems” that it has conducted sufficient hearings.
• A tax audit for the MAP years may be conducted, without clarity if such audit is restricted to the MAP issues.
• A concurrent Indonesian MAP request is required for a MAP request by another country’s tax authority.
• MAP does not postpone the obligation to pay the tax, unlike domestic legislation.

Indonesia is uniquely interpreting the tax treaty to limit the opportunity for MAP appeals, while introducing additional subjectivity in the rules via vagaries of  the Indonesian tax court’s hearing process.  Most importantly, it will be important to consider the MAP process upon the commencement of an Indonesian audit due to ongoing uncertainties.  

Notably, this guidance is being issued prior to the finalization of the OECD dispute resolution guidelines that will most likely result in inconsistent guidelines for MAP.