In many cases, international tax disputes often occur because of differences in tax authorities and taxpayers in interpreting Double Tax Avoidance Agreements (Tax Treaty) or Tax Treaty and / or transfer pricing for transactions with affiliated parties across affiliated jurisdictions. The solution so far has been mostly resolved through a process of objection or appeal (domestic remedies).

In the process, objections and appeals can take a long time and not infrequently require court fees which are also not cheap. As an illustration, taxpayers must wait for the tax authority’s decision on objections raised for up to 12 months. If the tax office in its decision rejects an objection or makes a decision that is less than expected, the taxpayer can take further legal proceedings by submitting an appeal to the tax court. The time period for submitting an appeal is three months after the taxpayer’s objection is accepted. Although the appeal case hearing in the tax court is 15 months from the appeal, the issuance of the decision can exceed that time period.

If the appeal is rejected or only partially granted, the taxpayer will be subject to additional administrative sanctions in the form of a 100% fine of the tax amount based on the appeal decision, which is not paid before filing an objection. Uncertainty is a record in this regard.

Mutual Agreement Procedure (MAP)

In fact, there are alternative approaches that taxpayers can take to resolve tax disputes related to cross-border transactions. These alternatives include applying for MAP. MAP is a procedure of mutual agreement among tax authorities to resolve administrative problems that arise in the application of P3B, including eliminating the occurrence of double taxation due to correction in transfer pricing. This approach is also expected to avoid unexplained income anywhere.

Referring to Minister of Finance Regulation (PMK) No. 49 / PMK.03 / 2019, the deadline for submission of MAP is three years from the time the tax assessment was issued, the date of proof of payment, withholding or collection of income tax (PPh), and since the tax treatment deemed inappropriate is carried out. If the deadline exceeds, then the MAP request cannot be accepted. However, taxpayers or P3B partners can reapply, as long as they do not expire.

The Directorate General of Tax (DGT) will conduct research on the information and documents required to determine whether an MAP request can be followed up or rejected. If the application is accepted, the DGT will follow it up by negotiating with an authorized official from the partner country. Negotiations take place a maximum of 24 months or two years from the moment the application is received.

Advance Pricing Agreement (APA)

In addition to MAP, taxpayers can also prevent transfer pricing disputes by submitting an APA application. APA is an initial agreement between multinational companies and one or more tax authorities of other countries in relation to the determination of fair transaction prices between related parties.

APA is not only unilateral, where the relationships formed only involve taxpayers with one tax authority. This means that APA can also be bilateral / multilateral in practice involving taxpayers with two or more tax authorities. Because APA is not a dispute resolution procedure based on P3B, therefore APA can also be submitted for transactions with parties that have special relations in jurisdictions that are not bound by tax treaty. Unlike the case with MAP which in its implementation is guided by P3B.

The DGT will respond to the APA application no later than 24 months after the request was submitted by the taxpayer and can be extended for the next 24 months. The transfer price agreement within the APA framework is valid for an affiliate transaction period of four years.

The application of APA and MAP is actually an interesting facility provided by the state. This policy can be a solution to the deadlock of the case or the convoluted process of the trial in the tax court. Moreover, the implementation of MAP and APA in Indonesia does not impose a single penny on the taxpayer. Unlike the case in a number of other countries, which take into account the costs of MAP and APA negotiations.

Unfortunately, not many taxpayers are interested in utilizing MAP and APA facilities. In fact, both of them have been initiated a long time ago (MAP since 2010). The minimal use of MAP and APA can be seen from the statistics of MAP and APA in Indonesia, which in recent years can still be counted on the fingers (see table).

Year Description MAP APA Total
Pra-2016 Application Received 69 14 83
Application Closed 1 0 1
Final Amount 68 14 82
2016 Application Received 19 25 44
Application Closed 32 3 35
Final Amount 55 36 91
2017 Application Received 16 2 18
Application Closed 20 3 23
Final Amount 51 35 86
2018 Application Received 26 13 39
Application Closed 17 15 32
Final Amount 60 33 93

Read too : Procedure for New Rules for Requesting Tax Dispute Settlement

Legal Intervention

DGT has emphasized that MAP can be carried out together with the objection and appeal process. Based on Government Regulation No. 274 of 2011, the MAP agreement will be the basis for improvement of DGT decisions related to taxpayer objections. With a note, the MAP process is complete before the taxpayer goes through an appeal process. In other words, the MAP results are stronger than the objection verdict.

Unlike the case if the MAP process is carried out simultaneously with an appeal in the tax court. If the results of the MAP come out before the appeal decision is legally binding then the results of the MAP agreement can be brought to court for consideration by the panel of judges in deciding the appeal case. On the other hand, if the verdict is appealed by the judge first, then the MAP process automatically stops or cannot be continued.

What needs to be noted is that the panel of judges is an independent party which in deciding cases cannot be forced. Therefore, there is no guarantee that the outcome of the MAP will be followed by the panel of judges in deciding appeals in the tax court. Unless, the taxpayer revokes his appeal when there is still room to revoke. It could be, this is one of the causes of doubt of taxpayers to submit an application for MAP or APA. The question is, what is the guarantee that DGT will process MAP and APA taxpayer requests? Even if followed up, can the final agreement provide legal certainty for taxpayers?


Although MAP and APA have been initiated a long time ago, in its implementation in Indonesia it seems to be a new thing. DGT statistics show that the implementation of MAP and APA is at least only seen starting in 2016 and reaching a peak in 2018. The good news, the level of completion of MAP in Indonesia is relatively better than many countries in the world.

According to the OECD notes – as explained by DGT – the completion rate of Indonesian MAP is around 55.97%, better than Japan (54.41%), Singapore (50.75%), Korea (47.01%), Malaysia (4, 55%) and the Philippines (0%). However, Indonesia’s performance was no better compared to China (57.4%), Australia (67.71%), New Zealand (72.92%), and Thailand (77.42%).

In my opinion, MAP and APA can be an alternative solution for taxpayers in dealing with or mitigating the risk of international tax disputes. However, to be able to ensure the success of both processes requires good faith from each party – both taxpayers and tax authorities.

For taxpayers, to ensure that MAP and APA requests are responded to properly by the DGT, it is not enough just to meet administrative requirements. Transparency and disclosure of financial information are the main keys for taxpayers to be able to maximize the MAP and APA options.

Meanwhile, the tax authority must have the spirit to serve taxpayers who apply for MAP and APA, if they want to reduce the burden of cases of objections and appeals that accumulate every year. DGT’s seriousness can at least be started by conducting more active outreach to taxpayers related to dispute resolution facilities that have long been initiated by the OECD and G20.