When the Evidence Speaks: PT CSI Defeats the DGT's Correction on Business Turnover Equalisation

The application for a Corporate Income Tax (PPh Badan) Overpayment Tax Assessment Letter (SKPLB) for the Tax Year 2020, submitted by PT CSI, reaffirms the Taxpayer's right to credit the Income Tax that has been withheld or paid in advance in accordance with the provisions of the Income Tax Law. PT CSI is a company engaged in geophysical services, whose activities include the acquisition of marine and multi-physics data, as well as the sale and provision of software to clients.

In this dispute, the Directorate General of Taxes (DJP) made a correction to PT CSI's business turnover of USD357,828.00, calculated through an equalization test with the Value Added Tax (VAT) Tax Base (DPP) for Deliveries. The Unbilled Receivable – Invoiceable account was not included in the business turnover calculation because, based on the Objection Discussion Minutes (BAPK) between PT CSI and the Audit Team, the account was not directly related to the issuance of tax invoices or revenue recognition. Therefore, the exchange rate difference (selisih kurs) on the Unbilled Receivable – Invoiceable account was not considered in the adjustments.

For the sales component, the DJP calculated an exchange rate difference of USD59,832.00 using the difference between the Minister of Finance Regulation (KMK) exchange rate and the company's internal global exchange rate. Meanwhile, for the Deferred Income component, the DJP calculated an exchange rate difference of USD66,195.00. Both exchange rate difference values were confirmed by PT CSI.

During the objection process, the DJP assessed that the grounds for objection submitted by PT CSI were unconvincing. This was because PT CSI only submitted data in the form of a table of exchange rate differences for the Deferred Income and Unbilled Revenue – Percentage of Completion accounts, without detailed calculations for the revaluation of these accounts. Furthermore, the DJP found inconsistency in the use of exchange rate values, namely between the KMK exchange rate and PT CSI's internal global exchange rate for the sales account, and between the KMK exchange rate and PT CSI's global exchange rate for the Deferred Income account.

PT CSI disagreed with the correction made by the DJP. One of the arguments presented related to the difference in the exchange rate between PT CSI's internal global exchange rate and the average exchange rate of Bank Indonesia, amounting to USD63,049.86. According to PT CSI, this difference arose because the DJP calculated the Rupiah value of the VAT DPP based on Tax Invoices for USD invoices, and then converted it back to USD using the Bank Indonesia average exchange rate. Meanwhile, PT CSI recorded the transaction in USD according to the invoice value issued to the client.

Differences also emerged in determining the basis for the Rupiah VAT DPP value. The DJP referred to the Tax Invoice for Rupiah invoices, then converted it to USD using the BI average exchange rate. Conversely, PT CSI used the equivalent USD value which automatically referred to the company's internal exchange rate as recorded in the General Ledger (GL).

Additionally, PT CSI refuted the DJP's statement that the company did not submit the calculation table for the revaluation results of the exchange rate difference on the Deferred Income and Unbilled Revenue – Percentage of Completion accounts. PT CSI asserted that these calculations had been submitted as an attachment to the response to the Notice of Results of Objection Review (Surat Pemberitahuan Daftar Hasil Penelitian Keberatan) and the Notice to Attend (Surat Pemberitahuan untuk Hadir/SPUH). Based on Article 15 paragraph (1) of the Minister of Finance Regulation Number 9/PMK.03/2013 concerning the Procedures for Submission and Settlement of Objections, the SPUH and the Notice of Results of Objection Review are part of the objection process series. Therefore, the DJP's opinion that PT CSI did not provide the revaluation calculation was deemed inaccurate, as the document had been submitted in the SPUH response.

Furthermore, PT CSI also contested the DJP's statement regarding the inconsistency in the use of exchange rate values. Based on the recalculation performed by PT CSI on the equalization of business turnover with the VAT Periodic Tax Return (SPT Masa PPN) DPP for the Tax Year 2020, a consistent result was obtained, namely the suitability between the business turnover and the VAT Periodic Tax Return DPP both during the objection submission and the appeal application.

Based on the Panel of Judges' legal considerations and after examining all the evidence submitted by both the DJP and PT CSI, the Panel was of the opinion that the DJP's calculation of the equalization of business turnover with the VAT DPP did not take into account the business turnover recording system implemented by PT CSI. Conversely, the equalization explanation and calculation submitted by PT CSI were deemed consistent with the company's internal recording system and supported by adequate recording evidence.

Thus, the Panel assessed that PT CSI succeeded in proving the correctness of the equalization calculation between business turnover and the VAT DPP as it should be. On that basis, the appeal submitted by PT CSI for USD 357,828.03 was granted in full.

This decision emphasizes the importance of consistency and transparency in the business turnover recording system, especially for Taxpayers conducting transactions in foreign currencies. The Panel of Judges decided to grant PT CSI's entire appeal application after assessing that the equalization method for business turnover with the VAT DPP carried out by PT CSI was consistent with its internal recording system and supported by strong evidence. Conversely, the DJP's calculation was considered not to have taken into account the characteristics of PT CSI's recording system.

This decision provides an important lesson that in tax disputes, data accuracy, completeness of supporting evidence, and consistency in the application of exchange rates and recording methods are determining factors in substantiation. Furthermore, this case shows that the Panel of Judges prioritizes substantive proof over mere administrative formalities if the Taxpayer is able to demonstrate a valid and accountable basis for calculation.

A Comprehensive Analysis and Tax Court Decision on This Dispute is Available here