Loss of Tax Appeal for Article 21 Income Tax (PPh 21) on Lump-Sum Wages of a Palm Oil Plantation Company Resulting from Equalization Correction

PT TBSM is an oil palm plantation company that, in order to fulfill various operational tasks such as harvesting, garden maintenance, and daily work, which are paid monthly, requires casual workers (lump-sum workers). The company filed an appeal against the correction of PPh Article 21 on the lump-sum labor costs amounting to Rp597,041,631.00. PT TBSM refuted the response from the Directorate General of Taxes (DJP) which referred to Article 1 point 11 of the Director General of Taxes Regulation No. PER-16/PJ/2016 (PER-16), and Article 9 paragraph (1) letter a of PER-16 concerning the cumulative income of non-permanent employees (including casual workers) subject to Income Tax Article 21. Substantially, the wages paid to the lump-sum workers were below the monthly Non-Taxable Income (PTKP) limit (Rp4,500,000.00), so they should not be an object of PPh Article 21 withholding.

However, unfortunately, PT TBSM did not fulfill the tax administration requirements which became the point of conflict in this appeal. DJP based its correction on the equalization results between the total salary/wage expense deducted in Corporate Income Tax and the PPh 21 object reported by PT TBSM. The use of the equalization technique was carried out by DJP because PT TBSM was unable to present adequate detailed data and PPh Article 21 withholding slips during the audit process. Procedurally, DJP had sent a letter requesting to borrow documents and twice sent warning letters, up to the stage of the Official Report on Partial Non-Fulfillment of Document Loan, such as the PPh Article 21 Periodic Tax Return (SPT Masa) along with its attachments, withholding slips, and payment slips (SSP), Contracts/Agreements related to the expenses, All evidence related to the expenses, Recaps/details of PPh Article 21 calculation for employees and honorarium for experts, as well as the Equalization of the PPh Article 21 object with the expenses in the financial statements.

Due to the non-fulfillment of the requested response by PT TBSM, DJP applied Article 26A paragraph (4) of the General Provisions and Tax Procedures Law (UU KUP), which is the rejection of newly submitted evidence by the Taxpayer during the objection process. DJP argued that accepting such new evidence would violate legal certainty and provide a loophole for uncooperative Taxpayers. Nevertheless, PT TBSM made an effort to prove the substance of its claim in the Tax Court, based on the Judge's authority (Article 76 and 78 of the Tax Court Law) to examine new evidence and use conviction in deciding the case.

The correction considerations put forward by DJP became the choice of the Tax Court Panel of Judges with a strong affirmation of its procedural considerations. The Panel of Judges stated that, referring to the formal letter evidence presented by DJP, it was proven that PT TBSM had been negligent in fulfilling the obligation to loan documents, which was a crucial basis during the audit. With the affirmation of Article 26A paragraph (4) of the UU KUP, the Panel decided that the late evidence could not be used as a consideration. As a result, PT TBSM's appeal was rejected entirely as it failed to meet its burden of proof to refute the DJP's correction, and the correction based on the equalization technique was automatically upheld.

This decision implies that compliance with documentation obligations at the audit stage is key to winning disputes at the litigation level. Although strong substantive arguments exist (e.g., wages below PTKP), procedural failure to present initial evidence will hinder the Taxpayer from maintaining its arguments, as the evidence will be rejected from the objection level up to the appeal. The main lesson is the importance of professional document management and a cooperative, fast, and comprehensive response to every request from the Auditor, in order to preserve the right to present evidence at the litigation level.

Comprehensive Analysis and Tax Court Decision on This Dispute is Available Here