The importance of an Indonesian taxpayer’s local file as audit defense documentation and penalty protection has been highlighted again by heavy scrutiny of Local Files during recent audits by the Indonesian Tax Authority (ITA). The ITA has recently escalated tax audits for certain taxpayers to criminal investigations based on the contents of their local file. The ITA has been particularly focused on comparable companies’ searches where there was perceived to be an absence of functional comparability as these were considered “potentially abusive.” This development highlights how critical it is for taxpayers to develop and maintain robust documentation in the Local...