PMK 28/2026 Signals Higher Transfer Pricing Stakes

Indonesia's Ministry of Finance recently issued PMK 28/2026. This regulation did not emerge in a vacuum. Indonesia's government has been operating under significant fiscal pressure, with restitution claims running at high levels. Concerns surrounding the rising value of tax refund claims and the tightening of preliminary refund procedures. PMK 28/2026 is, at least in part, a policy response to that pressure.

The Refund Privilege is Getting Harder to Keep

The most visible change under PMK 28/2026 is the tightening of the requirements for taxpayers seeking certain criteria (Kriteria Tertentu) status, a designation that enables access to preliminary VAT refunds. One provision, in particular, deserves closer attention from companies with related-party transactions.

Under the new framework, taxpayers that previously were granted taypayers with certain criteria (Wajib Pajak Kriteria Tertentu) status are effectively cancelled. Taxpayers were required to reapply within a 10-day window, 1–10 June 2026 precisely, though the new eligibility requirements are meaningfully stricter than before.

The most consequential new requirement is a threshold tied to tax corrections: to qualify and, critically, to maintain qualification, a taxpayer must not have had a tax correction exceeding 5% of its taxable profit or loss for three consecutive years.

Why Transfer Pricing Now Threatens Refund Access

On the surface, a 5% threshold seems manageable. Whereas in practice, it is not. Large corrections that move the needle on a company's profit percentage tend to come from a specific source: transfer pricing adjustments. Intercompany transactions are exactly the type of arrangement that, when challenged and corrected by the tax authority, can produce adjustments large enough to cross that 5% line.

Here is where PMK 28/2026 introduces a new layer of risk that did not exist before. Previously, if a taxpayer lost a transfer pricing dispute, either by agreeing to a correction or by exhausting the appeal process, the primary consequence was the correction itself, plus the possibility that the tax authority would apply mirroring: using the outcome of one year's audit to adjust related years. That was the known risk.

Under PMK 28/2026, losing a transfer pricing dispute now also triggers a 3-year lockout from certain criteria (Kriteria Tertentu) status. The logic is straightforward, but the math is unforgiving: the 5% rule requires three consecutive clean years. One qualifying correction restarts the clock. A taxpayer who loses a dispute today may not regain certain criteria status until 2028 or later.

The Hidden Cost of Settling a Transfer Pricing Dispute

Many taxpayers historically settled transfer pricing disputes not because they believed they were wrong but because settlement was commercially rational; the cost of agreeing to a reasonable correction was lower than the cost of prolonged litigation. That logic has not disappeared, but it now carries a new price tag. A settlement that once felt like a clean exit now potentially buys three years without access to preliminary refunds, a liquidity cost that can be substantial for businesses with a regular refund position.

This is not a theoretical concern. It is a practical reason to revisit transfer pricing arrangements that carry meaningful audit risk, particularly those involving high-value or structurally complex intercompany transactions.

Conclusion

PMK 28/2026, at its core, is a reminder and a fairly pointed one that transfer pricing is no longer just a tax risk. It is a cash flow risk. Companies that have historically managed transfer pricing disputes conservatively, accepting corrections to avoid prolonged engagement with the tax authority, now need to weigh those decisions differently.

The regulation reinforces the value of proactive transfer pricing documentation, defensible pricing policies, and careful evaluation before accepting any correction. Losing a transfer pricing dispute has always been costly. Under PMK 28/2026, it costs a little longer.

Under PMK 28/2026, transfer pricing adjustments no longer stop at tax corrections; they now carry direct implications for refund access and liquidity planning. Companies with significant related-party transactions should evaluate whether their current transfer pricing framework can withstand the new 5% threshold test. Reach out to discuss with our advisors before a manageable adjustment turns into a multi-year cash flow consequence.