Abstract
The manufacturing industry has become the leading sector in Indonesia but also the most common source of transfer pricing disputes. The excessive payment of interest expenses that has caused the MNEs to suffer from years of consecutive losses remains questionable, compounded by the illogical debt-to-equity ratio. The Indonesian government formally introduced a set debt-to-equity ratio in 2016 for the second time. Its first introduction in 1983 was revoked in 1984 in a bid to attract foreign investors. Currently, an entity has to meet the enforced Indonesian anti-abuse rule, arm’s length principle and debt-to-equity ratio.
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