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Abstract

This study aims to explore the feasibility of implementing safe harbors in transfer pricing regulations in Indonesia. Safe harbors are alternative tax policies for taxpayers on specific transactions, which can exempt them from general provisions if meets certain specific regulations set by the tax authority (United Nations, 2017). Using a qualitative methodology, this study explores data from various literature and the results of interviews with experts in the field of transfer pricing. Moreover, this research utilizes interpretative paradigm, inductive approach, and descriptive study. With the help of NVIVO software, the researcher conducted a thematic analysis of the data obtained. This study concludes that safe harbors can be applied to low-value-added intragroup service transactions and toll manufacturing taxpayers. The implications of implementing safe harbors will create opportunities for increased foreign investment, reduced tax disputes, and increased tax compliance. However, the implementation of safe harbors is expected to face challenges from within and outside the Directorate General of Taxes. Internal challenges include the lack of legal standing, limited comparative data, and the difficulty of regulatory formulation. Meanwhile, external challenges that arise in implementing safe harbors include double taxation, tax planning, difficulties in reaching an agreement, taxpayer distrust, and taxpayer jealousy. While previous research has discussed safe harbors, this study produce novelty in theory and location by formulating a form of safe harbor that can be implemented in Indonesia as a solution to transfer pricing disputes using Preventive Law Theory.

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