| dc.description.abstract | Article 18 paragraph (3) of Law Number 36 of 2008 authorizes the Director
General of Taxes to make corrections on royalty payments made by affiliated
companies in Indonesia to multinational companies abroad based on the arm's length
principle. But this action can result in the company being inefficient in allocating
resources. Based on the description of the background, it can be formulated several
main problems discussed in this study, namely; what are the factors that drive the
practice of transfer pricing, how is the application of arm’s length principle in tax
law and how tax law in Indonesia regulates and determines the distribution and
efficiency of resource allocation in patent license transactions by multinational
companies to affiliated companies in Indonesia.
This research is a normative juridical research and is prescriptive. This
research uses both statutory approach and case approach where several cases are
studied for reference to a legal issue.
Based on the results of the study, it is known that the factors that encourage
transfer pricing practices in patent licenses are the factors of the country of
residence, capital and know-how contracts. Regarding the application of arm’s
length principle, it is known that the application of the principle has not used the
most appropriate method. Tax law plays a role in avoiding double taxation and
regulates and determines efficiency in terms of affiliated companies following the
provisions stipulated in the Income Tax Law and its implementing rules. | en_US |
