Assessing the Fair Value of Affiliated Assets: Fiscal Assessment Correction Council on Final Income Tax on Property

The matter arose when PT KSM reported the sale of land and buildings to its affiliated companies, PT KIA and PT KKM. Upon reviewing the transaction, DJP concluded that the reported transfer price did not reflect a fair market value. Relying on its internal appraisal, DJP established a Final Income Tax Article 4(2) tax base of IDR494,087,883,161.00, incorporating a value difference of IDR180,494,565,161.00 as additional taxable transfer value.

PT KSM objected to this adjustment, arguing that the transaction price had been determined using an independent KJPP valuation, which followed recognized and professionally accepted appraisal standards. PT KSM also noted inconsistencies in DJP’s market value assessments for similar assets within the same business group, raising concerns regarding the reliability of DJP’s valuation. DJP, however, maintained that its appraisal reflected actual market conditions and had been prepared in accordance with applicable tax valuation rules.

During the hearing, the Panel carefully examined both valuation approaches. The independent appraisal submitted by PT KSM was found to be more coherent and supported by clearer technical reasoning. In contrast, DJP’s valuation did not sufficiently explain significant variations appearing in comparable assets. Because DJP did not fulfill its burden of proof, its assessed market value could not be fully sustained. Nevertheless, the Panel did not entirely adopt PT KSM’s figures either. After considering the methodologies and documentation from both sides, the Panel exercised its statutory authority to establish its own fair market value.

Ultimately, the Panel determined the appropriate tax base to be IDR358,394,033,842.00, resulting in a Final Income Tax of IDR8,959,850,846.00. This recalculation created an underpayment of IDR1,120,582,111.00, which—together with interest sanctions of IDR346,708,105.00—brought the total amount payable to IDR1,467,290,216.00. Through this determination, the Court corrected DJP’s excessive adjustment while recognizing the need for certain revisions to the taxpayer’s valuation, leading to the appeal being partially granted.

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