Legal Insights

Mutual Agreement Procedure – a Tax and Transfer Pricing Dispute Settlement Option

10 Oct 2022


What to do when your company receives an unfavorable tax audit outcome on transfer pricing or other tax issues? Of course, there is the possibility to object and appeal the decision. However, the Harmonization of Tax Regulations Law contains a reference to another option: the Mutual Agreement Procedure or “MAP”. 


An MAP is a mechanism to resolve double taxation issues arising from tax disputes, based on tax treaties Indonesia has concluded with other jurisdictions, including with Germany. Taxpayers who are of the opinion that they are subjected to taxation that is not in accordance with the tax treaty can request the tax authorities of their respective countries to resolve the issue. This request for an MAP is separate from the Indonesian domestic dispute resolution mechanism (tax objection and appeal) and can be filed as soon as the tax audit results are final. This is also advisable as the MAP process is lengthy and there is unfortunately no obligation of the two tax offices to reach agreement, nor is there any deadline under most tax treaties.


The Indonesian tax authorities have published data showing that during the last few years a significant number of MAPs has been requested and that even during the pandemic many cases have been closed. According to the Organisation for Economic Co-operation and Development (“OECD”), most of the 40-plus outstanding MAPs as at 31 December 2020 were with Japan and Korea, but there are also cases with countries further afield such as with the Netherlands. Hence there is evidence to show that the option to apply for an MAP is a real option to consider.


In conclusion, entering into an MAP may be an attractive additional instrument to challenge adverse tax audit outcomes for Indonesian subsidiaries of MNEs.


More information can be obtained via id/apa-map and

About the Author
Iwan Hoo LL.M.(taxation) - Partner