Crucial Victory for PT AGN: FPSO Classified as Tangible Asset Group III, Cancels Rp99 Billion Correction

The Tax Court Decision Number PUT-001367.15/2023/PP/M.VIIIB Year 2025 is an important affirmation regarding the determination of fiscal depreciation periods for non-conventional assets in the oil and gas industry. In the dispute between PT AGN and the Directorate General of Taxes (DJP) concerning the Overpayment Tax Assessment Letter for Corporate Income Tax (PPh) for the 2019 Fiscal Year, the Panel of Judges decided to fully grant the Appeal of the Appellant. This decision effectively canceled a significant fiscal correction of IDR 99,753,351,563.00 relating to the Negative Fiscal Adjustment item.

The core of the corporate income tax dispute centered on the classification of the Floating Production, Storage, and Offloading (FPSO) Karapan Armada Sterling III as a tangible fixed asset. PT AGN, as the Taxpayer, argued that the FPSO should be classified under Group III with a 16-year useful life for fiscal depreciation purposes. Their main argument was that the FPSO is a floating vessel specifically designed for production, storage, and offloading of hydrocarbons at oil and gas fields, fundamentally different in function from conventional cargo ships regulated under tax regulations.

Conversely, the DJP insisted that the FPSO should be classified under Group IV with a 20-year useful life. The tax authority based its correction on its interpretation of the applicable regulation, considering the FPSO as a “ship” with a weight exceeding 1,000 DWT and storage functionality. From the fiscal authority’s perspective, this classification complied with the provisions governing certain types of ships as listed in the Annex of the Minister of Finance Regulation (PMK) related to fiscal depreciation of tangible assets.

After examination, the Panel of Judges found crucial facts supporting the Appellant’s arguments. The Panel stated that an FPSO is an offshore facility/floating equipment functioning as an integrated production and storage facility in an oil and gas field. Therefore, an FPSO cannot be equated or categorized as a passenger or cargo ship as regulated in the PMK Annex used as the basis for the DJP’s correction. Since the asset is not specifically addressed in the regulation and is substantively more of a specialized production tool, the FPSO is more appropriately classified under Group III, in line with PT AGN’s argument.

With strong evidence regarding the asset’s substantive function and the inaccuracy of the tax authority’s classification basis, the Panel ultimately decided to cancel the entire fiscal correction of Corporate Income Tax for 2019 arising from the negative fiscal adjustment of depreciation. This victory reaffirms the principle that in determining fiscal useful life, the specific characteristics and functions of tangible assets—especially non-conventional assets in certain industries—must be thoroughly considered and should not be equated with general categories in regulations when no specific provision exists.

The key to success in disputes over fixed asset classification lies in the taxpayer’s ability to prove the substance and specific function of the contested asset, particularly for non-conventional tangible assets not explicitly listed in fiscal depreciation schedules. The principle of substance over form was the main determinant in this case, recognizing the FPSO as a specialized oil and gas production tool (Group III) rather than merely a storage vessel (Group IV).

Comprehensive and Complete Analysis of This Dispute is Available Here