Finding Fair Value: Tax Court Partially Grants PT IMS's Appeal, Reduces Property Transaction Value by IDR 24.2 Billion.

PT IMS successfully won part of its appeal dispute at the Tax Court against the Directorate General of Taxes. The decision, numbered PUT-004731.25/2023/PP/M.IIIB for the year 2025, partially granted PT IMS's appeal, which was triggered by an Underpaid Income Tax Assessment Letter for Final Article 4 Paragraph (2) Income Tax for the December 2018 Tax Period.

The main dispute in this case centered on a correction of the Tax Base for Final Article 4 Paragraph (2) Income Tax amounting to Rp37,961,144,000. This correction amount came from two transactions: first, the transfer of rights to land and/or buildings (property) to an affiliated party, Mr. AA, and second, the Income Tax obligation for building rent to PT JGL.

The largest dispute, regarding the correction of the Tax Base for the transfer of land/building rights, arose because the DGT considered the property sale transaction from PT IMS to Mr. AA (a party with a special relationship) did not reflect a fair market price. The DGT then conducted its own property appraisal and set the Tax Base at Rp77,655,000,000.

However, PT IMS insisted that the actual transaction value, based on the Sale and Purchase Deed, was Rp40,000,000,000. During the appeal process, PT IMS submitted additional evidence in the form of an appraisal report from an Independent Public Appraisal Services Consultant. This KJPP appraised the fair market value of the property after adjustments for time and other conditions at Rp53,435,000,000.

The Panel of Tax Court Judges, with the authority to determine material truth, ultimately decided to accept the value produced by the Independent Appraiser. Thus, the Panel partially granted the appeal, so that the upheld Tax Base for the property transfer transaction was set at Rp53,435,000,000, and canceled the difference in correction amounting to Rp24,220,000,000.

In contrast to the property dispute, the dispute regarding the Final Article 4 Paragraph (2) Income Tax related to building rent amounting to Rp306,144,000 was won entirely by the DGT. PT IMS argued that the tax obligation for the building rent had been fulfilled by the building owner, PT Jakarta Golden Landmark.

However, the Panel of Judges referred to Government Regulation Number 34 of 2017 Article 3 Paragraphs (1) and (2). These provisions clearly state that a Domestic Corporate Tax Subject (such as PT IMS) as the lessee is obligated to act as a withholding agent for Income Tax on rental income. Since PT IMS could not prove that it had performed the withholding, payment, and reporting, the DGT's correction of Rp306,144,000 for this building rent transaction was upheld in its entirety.

As a result of the partial granting, the final calculation of the Final Article 4 Paragraph (2) Income Tax payable by PT IMS decreased significantly. Based on the Panel of Judges' calculation, the Final Income Tax amount still due, including adjusted administrative sanctions, was set at Rp526,571,970. This decision highlights the importance of formal compliance in tax withholding (building rent) as well as the recognition of fair value supported by an Independent Appraiser in affiliate transactions (property sale).

A Comprehensive Analysis and the Tax Court's Decision on This Dispute is Available here.