Bali Hotel Loses Appeal: Trekking and Personal Trainer Activities Ruled as VAT Objects, Not Entertainment Tax

The tax dispute between PT. AA and the Directorate General of Taxes (DGT) highlights the uncertainty in classifying local tax objects versus Value Added Tax (VAT) in the hospitality industry. The core conflict focused on whether activities such as personal instruction and outdoor activities (trekking/cycling) fall under the category of entertainment services exempt from VAT. DGT issued a correction, assessing that these services did not meet the criteria for spectacles or performances as regulated by local tax regulations.

During the trial, PT. AA maintained that these activities had been reported as Entertainment Tax objects in Gianyar Regency. However, the Board of Judges opined that individual personal instruction and outdoor tourism activities do not fall within the scope of Entertainment Tax under the PDRD Law. Consequently, these services were classified as Taxable Services subject to VAT. This decision emphasizes the importance of clear revenue separation between pure hotel facilities and additional services.

This legal resolution provides a lesson for hotel businesses to re-validate the legal aspects of each additional service. The implication is that paying local tax on an object that is legally a VAT object does not waive the VAT obligation. In conclusion, inaccuracies in tax object classification can trigger significant administrative sanctions due to improper tax collection.

A Comprehensive Analysis and the Tax Court

Decision on This Dispute Are Available Here