Discount or Reward? The Story of PT TV vs. DJP in the Tax Court

PT TV has just concluded a fierce "war" in the Tax Court. It wasn't a battle over television prices, but a heated contest over the classification of price discounts and incentives they gave to distributors in 2018.

Was the discount truly a regular trade discount? Or could it be considered a gift, award, or bonus subject to Article 23 Income Tax (PPh) withholding?

This battle culminated in Tax Court Decision No. PUT-005043.12/2021/PP/M.IIB Year 2025, which ruled that PT TV partially won but still had to pay tax on another part.

It all began when the Directorate General of Taxes (DJP), referred to here as the Respondent, conducted an audit. The DJP found that PT TV had provided various price discounts and incentives to distributors totaling IDR4,757,797,230 from January to March 2018.

According to the DJP, all these costs, recorded by PT TV as discounts or compensation, should have been classified as Gifts, Awards, Bonuses, and the like, subject to Article 23 PPh at a rate of 15%.

PT TV, of course, objected. They argued that:

1. This was a standard sales discount/trade discount, even regulated by the Minister of Trade.
2. It was a business practice to compete and adjust prices for obsolete (out-of-date) goods.
3. Such discounts should not be categorized as gifts or awards requiring Article 23 PPh withholding.

To determine the winner, the Panel of Judges at the Tax Court did not merely look at the transaction's label (discount or reward) but examined its substance and the conditions of its provision—a process known as the Test of Material Truth.

As a result, out of the eleven disputed discount types, the Tax Court divided them into two groups.

Several types of price discounts were considered by the Tax Court as reasonable business costs or subject to other types of tax, so the DJP's corrections were annulled. The total annulled correction was IDR968,905,883, covering:

1. Price compensation worth IDR339,504,528, deemed as price protection due to price fluctuations or obsolete goods; this was considered a reasonable sales cost.
2. Advertising worth IDR224,358,675, Part of it had already been subject to Article 23 PPh withholding, the remainder was an object of Final Income Tax Article 4 paragraph (2).
3. Space Rent worth IDR27,000,000, This was a building/space rental cost, an object of Final Income Tax Article 4 paragraph (2), not Article 23 PPh.
4. IKT (Store Employee Incentives) worth IDR10,560,000, Because it was paid to individuals (employees), it should be an object of Article 21 Income Tax, not Article 23 PPh.
5. Display worth IDR1,750,000, A discount for display goods was considered a regular sales cost, not a gift.

However, some discount types were still considered Gifts/Awards because they were given conditionally and to parties (distributors) who "worked" to achieve them, not as a general discount for all end consumers. The total correction upheld was IDR3,788,891,347.

These types were viewed as gifts because:

• They were given periodically and conditionally (related to performance/target achievement).
• They were given to distributors (Corporate Taxpayers), not to all end consumers.
• They were not listed on the Tax Invoice.

These discounts included:

• Trading Term worth IDR3,173,493,557
• Rebate worth IDR296,220,391
• Payment Discount worth IDR139,223,778
• Sell Out worth IDR119,990,000
• Anniversary worth Rp 44,600,000

With this ruling, the Tax Court reduced the Tax Base (DPP) for the Appellant's Article 23 PPh from the initial DJP correction of IDR9,157,083,488 to IDR8,188,177,605.

Consequently, the amount of Article 23 PPh that PT TV had to pay was also reduced (partially granting the appeal), from the previous IDR999,137,418 to IDR987,490,129.

Important Lesson: This decision reaffirms that in the tax world, giving a "discount" doesn't always mean cutting the price. If a discount is given to business partners (distributors) as a reward for achieving targets (specific performance), and not as a general selling price discount, then such an incentive can be considered a Gift/Award subject to Article 23 PPh withholding.

Companies must be very careful in documenting and defining the nature of transactions, because tax regulations will always take precedence over regular trade rules.

Comprehensive Analysis and the Tax Court Decision on This Dispute are Available here.