Friday, October 23, 2026

Intercompany recharges: how to charge costs between group companies so both sides agree

Procapy Team

On working day 3 of the September close, the group controller of a food manufacturer tries to eliminate the intercompany balances. The group has three PTs: a holding company in Jakarta, which employs the shared finance, HR and IT teams and pays for group-wide costs, a factory in Pasuruan and a distribution company. The holding’s ledger says the factory owes it Rp 1,284,600,000. The factory’s ledger says it owes Rp 1,031,850,000.

The difference, Rp 252,750,000, takes eight working days and a long email thread to explain. None of it is fraud, and little of it is a mistake. It’s recharges: costs the holding paid for the factory, invoiced at the last minute, split on a basis the factory never agreed and booked by the two companies in different months.

Every group with more than one company has intercompany recharges. This guide covers what they are, how a recharge should flow from the cost to the settlement, a worked example of that Rp 252,750,000, why recharges go wrong and the Indonesian details: separate PTs, related-party scrutiny and the tax on each charge.

What is an intercompany recharge?

An intercompany recharge is a charge from one company in a group to another, for a cost the first company paid but the second one benefited from. The common ones:

Shared services: finance, HR, IT or legal teams employed by one company and working for all of them.
Group purchases: software licences, insurance, audit fees or a contract bought once for the whole group.
Employee costs on another company’s behalf: travel and expenses of someone employed by one company while working for another.
Secondments: staff on one company’s payroll working full-time in another.

A recharge is priced in one of three ways, and which one applies matters for tax:

At cost: a third-party cost passed on exactly, with no margin, backed by the original invoice.
Cost plus a margin: for a service one company provides to another, priced as an unrelated provider would charge.
By an allocation key: a shared cost split by headcount, users, revenue or floor area.

When the group consolidates, recharges cancel out: one company’s receivable is the other’s payable. The intercompany reconciliation checks that both sides agree, and elimination removes them from the group accounts. Both only work if the two companies recorded the same amount in the same period.

How a recharge should flow, step by step

Agree in advance. What will be recharged, on what basis and how often, in a written agreement between the companies.
Tag at source. When the cost is paid, record which company benefits, on the invoice or expense claim itself.
Calculate. Apply the agreed basis: the actual cost, cost plus the agreed margin or the agreed allocation key.
Invoice. The paying company invoices the benefiting company, with the evidence and the tax documents the charge needs.
Book both sides in the same period. The benefiting company records the payable in the same month the paying company records the receivable.
Settle. The benefiting company pays on agreed terms, as it would pay any vendor.
Reconcile and eliminate. At month-end, both balances agree, any difference is listed with its cause and date, and the group eliminates the balances on consolidation.

A worked example: Rp 252,750,000, line by line

Here is what the group controller eventually found behind the difference between the two ledgers:

Reconciling item	Rp ’000
September shared services, booked by the factory in October	148,500
Insurance, split differently by each side	54,000
Three trips the factory says weren’t for it	36,900
Payment in transit	13,350
Difference	252,750

Shared services, Rp 148,500,000. The holding invoiced September’s finance, HR and IT services on 30 September. The invoice reached the factory’s AP team on 3 October, and they booked it in October. Same amount, different months.
Insurance, Rp 54,000,000. The holding renewed the group’s property and fleet insurance and split the premium by revenue, which gave the factory Rp 95,400,000. The factory had accrued Rp 41,400,000, its share under last year’s split by headcount. Nobody had agreed which key applied this year.
Travel, Rp 36,900,000. Three trips by the group operations director, with flights, hotels and a hire car, recharged to the factory. The factory says they were to the distribution company’s warehouse. The expense claims were coded to the holding’s own cost centre, so nobody recorded at the time which company the trips were for.
Cash in transit, Rp 13,350,000. The factory paid an earlier recharge on 30 September, and the holding’s bank credited it on 1 October. A genuine timing difference, and the only item that should be on this list.

Only the last item is expected. The other three come from the process: a recharge invoiced on the last day of the period, an allocation key nobody had agreed and a cost nobody tagged when it was paid. Each one takes minutes to get right when the cost is incurred, and days to untangle at quarter-end.

Why intercompany recharges go wrong

Recharges are worked out quarterly or yearly. From spreadsheets and memory, long after the costs were paid, when nobody remembers who a trip was for.
The benefiting company first hears about it from the invoice. It never agreed to the charge, so it disputes it, or books it late while it asks questions.
Allocation keys nobody agreed or updated. Headcount from two years ago, or revenue in one company’s calculation and headcount in the other’s accrual.
Different cut-offs. One side books on the invoice date, the other on the day the invoice arrives.
Costs coded to the payer. An invoice or expense claim is booked to the paying company’s own cost centre, and the recharge has to be reconstructed from it later.
No agreement or evidence. When the tax office or the auditors ask what service was provided, nobody can show it.
Informal settlement. Balances are netted against each other, or one company pays another’s vendor, without documents both sides can trace.

Intercompany recharges in Indonesia

Every PT is its own taxpayer. Each PT in a group has its own NPWP, books and tax returns, so a recharge is a transaction between two taxpayers, with an invoice and tax documents, not an internal journal.
Related-party scrutiny. For charges between related companies, the tax office can ask whether the service was actually provided, whether the paying company benefited from it and whether the price is what unrelated parties would have agreed. Keep the agreement, the allocation basis and the evidence behind each charge, such as usage reports, headcount lists and trip purposes, and confirm your documentation requirements with your tax adviser.
VAT and withholding depend on what the recharge is. A service with a margin, a pass-through of a third-party cost and a shared cost split by a key can be treated differently. Whether a recharge carries VAT, and so needs a faktur pajak for the receiving PT to credit the input VAT (PPN masukan), and whether PPh 23 is withheld, should be agreed with your tax adviser for each type of recharge and then applied the same way every time.
Charges from overseas group companies. A management fee from a parent in Singapore, for example, can bring withholding tax (PPh 26, where a tax treaty may apply) and VAT on services used from abroad. It’s usually invoiced in a foreign currency, so record the rate used and any exchange difference in the Indonesian PT’s books.
Consolidation. Groups that prepare consolidated statements eliminate intercompany balances and transactions, so both PTs need to record each recharge in the same period, at the same amount.

Signs your intercompany recharges need work

You probably need to look at how you recharge costs if any of these sound familiar:

Intercompany balances don’t agree at month-end, and the difference is explained at quarter-end.
Recharges are calculated once a quarter or once a year, in a spreadsheet.
Subsidiaries dispute recharges after they’re invoiced.
Nobody can say which allocation key was used, or when it was last updated.
Staff working for another company claim their expenses from their own, and nobody records which company benefited.
There’s no written agreement for shared services.
Balances are settled by netting them against each other.

A recharge agreed in advance and tagged at source is a schedule. One worked out at year-end is a negotiation.

How to set up intercompany recharges

Write down what gets recharged. List each type of recharge, its pricing (at cost, cost plus a margin or by a key) and how often it’s charged, in an intercompany agreement signed by each company.
Agree the allocation keys once a year. Choose one key for each shared cost, such as headcount, users or revenue, document the numbers behind it and update them on a fixed date.
Tag the benefiting company at source. When an invoice or expense claim is entered for another company’s benefit, record both the paying and the benefiting company there and then.
Recharge monthly, on a calendar. Issue recharges by a fixed working day before month-end, so the receiving company can book them in the same month. Put agreeing intercompany balances on your month-end close checklist.
Let the receiving company approve. Larger recharges go to the receiving company’s budget owner before they’re invoiced, through your approval matrix, so disputes are settled before anything is booked.
Reconcile every month. Agree balances by an early working day, and list anything left, such as cash in transit, with its date and cause.
Settle in cash, on terms. Pay recharges like any vendor invoice, rather than netting balances informally, and keep the documents both sides can trace.

How Procapy helps

Procapy gives each legal entity its own currency, policies, tax rules and approval chains, and gives the group one consolidated view over all of them. Every transaction carries its entity as a dimension, so the group view and the entity view are the same data, not two reconciliations of it.

When an employee in one entity incurs a cost on behalf of another, Capy Expense tags the transaction with both the paying and the benefiting entity when it’s submitted. Procapy produces the recharge schedule from those tags, so intercompany balances are built from tagged transactions rather than reconstructed at quarter-end. ProcAI extracts VAT, GST or PPN from receipts and invoices, each entity carries its own tax codes and recovery rules, and withholding tax obligations on vendor invoices are flagged where the local regime requires them.

A central AP or shared-service team can process for every entity from one workspace, with vendor records shared across the group or held per entity. Segregation of duties is enforced within each entity and across them, and every submission, approval and payment is recorded with its entity in one audit trail. The multinational companies page covers the rest. Book a 30-minute walkthrough, bring your entity list and the recharges that cause the most arguments, and we’ll configure two of your entities live.

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