When VAT is Owed and the Administrative Consequences of VAT: Legal Implications of Corrections to VAT DPP Based on Sales Projection Documents in Credit Applications

The essence of the obligation to collect VAT is the actual delivery of Taxable Goods (BKP) or Taxable Services (JKP). This VAT dispute case involving CVL highlights the Directorate General of Taxes' practice of correcting the Output VAT DPP amounting to Rp8,928,838,000 based on a proforma sales report prepared by CVL for bank credit applications. The proforma sales document represents an estimate/forecast of revenue prepared based on assumptions and comparisons with similar companies regarding profit margins intended for credit analysis.

This disputed decision does not involve inflating revenue in audited financial reports to obtain bank credit; rather, the Directorate General of Taxes merely made corrections based on the credit application documents. The Directorate General of Taxes legally obtained such documents from a third party, Bank BCA, through a written request. However, to form the basis for the correction, the burden of proof under Article 12 paragraph (3) of the KUP Law requires competent and sufficient evidence of the actual delivery. In this ruling, the Directorate General of Taxes (DGT) used projection data as the sole evidence to establish a VAT Underpayment Assessment Letter (SKPKB) for the March 2018 Tax Period.

The main point of the dispute arose from differing interpretations of the timing of VAT liability and the evidentiary weight. The DGT argued that since CVL was confirmed as a Taxable Entrepreneur (PKP) on March 2, 2018, all activities related to the delivery (including projections in bank documents) should be considered VAT-payable turnover, in accordance with the VAT obligation. Conversely, CVL presented the fact that commercial operations only commenced in April 2018, thus, in fact, no BKP/JKP deliveries occurred in March 2018, making the March 2018 VAT Periodic Tax Return report with a zero value correct.

In resolving this dispute, the Panel of Judges clearly distinguished the administrative obligations of the VAT-paying Entrepreneur from the substantive VAT obligations. The Panel concluded that the proforma sales documents submitted by CVL to Bank BCA were merely projection data designed for credit application purposes. According to the Panel of Judges, the documents did not meet the criteria for competent, relevant, and sufficient evidence to prove the actual, unreported transfer of Taxable Goods/Services. The Panel of Judges referred to Article 12 paragraph (3) of the General Provisions and Tax Procedures Law (UU KUP), which requires the Directorate General of Taxes (DGT) to prove any corrections made. Because the DGT failed to provide evidence demonstrating the realized turnover from the pro forma documents, the corrections to the VAT DPP were declared untenable.

This ruling has significant implications for tax practices, particularly for taxpayers starting a new business or seeking funding. This ruling sets a strong precedent, affirming that business planning or projection data cannot simply be used as a tax base by the tax authorities. The lesson learned is the importance of taxpayers ensuring a clear separation between the date of PKP confirmation and the date of commencement of commercial operations, and that any corrections must be supported by concrete transaction evidence recorded in valid bookkeeping.

Therefore, the Tax Court granted CVL's appeal in its entirety. This ruling highlights the tax authorities' failure to substantiate the turnover correction and reiterates the principle that VAT is payable only when actual BKP/JKP are delivered. Taxpayers need to strengthen their documentation regarding their commercial operation date and always anticipate that external data, including bank filings, may be subject to audit, even if the data is projected.

A comprehensive analysis and the Tax Court's ruling on this dispute are available here.