Secondary Adjustment : Background and Implementation in Indonesia
Fiscal adjustments in transfer pricing ensure that transactions between affiliated entities reflect the Arm’s Length Principle (ALP), aligning them with conditions of independent, unrelated parties. These adjustments, as outlined in the OECD Transfer Pricing Guidelines 2022, include primary, corresponding, and secondary adjustment. A primary adjustment corrects non-compliant transfer prices, while a corresponding adjustment prevents double taxation. Secondary adjustment address additional tax implications. These measures are crucial for maintaining tax fairness and aligning transfer pricing with value creation, preventing tax avoidance, and ensuring accurate tax distribution among multinational enterprise (MNE) group members.
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