Analysis of the fairness of loan interest rates to affiliated parties based on the arm's length principle using the CUTM at PT X

Abstrak

This study aims to analyze the fairness of the loan interest rate applied between PT X and its affiliated party, YZ Ltd., based on the Arm's Length Principle using the Comparable Uncontrolled Transaction Method (CUTM), in accordance with Minister of Finance Regulation (PMK) No. 172 of 2023. This research is motivated by the increasing complexity of transfer pricing practices in intercompany financial transactions, particularly thin capitalization schemes that may be used as a means of profit shifting through the setting of unreasonable loan interest rates. This study employs a qualitative approach with a descriptive-analytical technique through a case study design. Data were obtained from Transfer Pricing Documentation, interviews with six informants representing the company's internal parties, tax consultants, and the tax authority, and were processed using NVivo software. The results show that PT X did not have a comparable internal transaction, so external comparables were used, namely the benchmark interest rates of Bank Indonesia and the Bank of Japan, adjusted with a Country Risk Spread. The fairness test on three loan agreements shows that the interest rates applied by PT X (5.40% for the Rupiah loan, and 2.50% and 2.00% for the Yen loans) fall within or below the interquartile range of the comparable interest rates, thereby satisfying the arm's length principle. This study concludes that the selection and application of the CUTM method by PT X was appropriate and does not indicate any potential loss to state tax revenue.