THE REGULAR OF DIRECTOR GENERAL OF TAXATION

NUMBER : PER - 32/PJ/2011

ARTICLE 11

The Comparable Uncontrolled Price (CUP) method compares the price charged for property or
services transferred in a controlled transaction to the price charged for property or services
transferred in a comparable uncontrolled transaction in comparable circumstances.

The Resale Price Method (RPM) compares the price in transaction of a product carried out by related
party with the resale price of the product after deducting the gross profit, which reflects the function,
assets and risks, for the resale of the product to unrelated party or resale of the product carried out
under fair conditions.

The Cost-Plus Method is method that carried out by adding gross profit obtained by the same
company from transactions with unrelated party or gross profit obtained by other companies from
comparable transaction with unrelated party on the cost of goods sold in accordance with arm length
principle.

Profit Split Method (PSM) is a Transactional Profit Method Based conducted by identifying the
combined profit on affiliate transactions that will be shared by related party on economically valid
basis that approximates on profit shared that would have occured and will be reflected in the
agreement between unrelated party, using the Contribution Profit Split Method or the Residual Profit
Split Method.

The transactional net margin method (TNMM) compares the percentage of net profit margin to costs,
sales, assets or other bases on related party transaction with the percentage of net profit margin
earned on comparable transactions with unrelated party or percentage of net profit margin obtained
from comparable transactions carried out with unrelated party.

The appropriate conditions in applying the Cost-Plus Method (Cost Plus Method), are the following:

1. There are no differences in the transactions being compared that would materially affect the
price; or
2. Reasonably accurate adjustments can be performed to account for material differences
between the controlled and the uncontrolled transaction.

The appropriate conditions in applying the Resale Price Method/RPM, are the following:

1. a high level of comparability transactions between taxpayers having related party and
taxpayers having unrelated party, especially the level of comparison based on the results of
the analysis of functions, even though the goods or services that are traded are different; and
2. the reseller does not provide significant added value for the traded goods or services.

The appropriate conditions in applying the Cost-Plus Method (Cost Plus Method), are the following:

1. Intermediate goods are sold to the related party;

2. there is a contract / agreement on the use of a joint facility agreement or a long-term buy and
supply agreement between related party; or
3. the controlled transaction is the provision of services

The appropriate conditions in applying the Profit Split Method/PSM, are the following:

1. the transactions between related party are closely related to each other so that it is not
possible to study separately; or
 2. there is a unique intangible assets between each parties that causes difficulties in finding the
appropriate comparables data.

The appropriate conditions in applying the Transactional Net Margin Method/TNMM, are the following:

1. one of the party in a related party transaction makes a special contribution; or

2. one of the party in a related party transaction performs a complex transaction and has
transactions related to each other.