Resounding Victory! Logistics Company Avoids Hundreds of Millions in Tax Bill Due to Difference in Interpretation of Ship Charter and Outright Sale

In the world of logistics business, every rupiah spent on shipping costs must be calculated carefully. However, for PT PGL, expenditures for shipping services suddenly turned into a heated dispute with the Directorate General of Taxes (DJP). This case is not just about numbers in financial reports, but a battle over the definition of how a shipping service should be subject to Final Income Tax (PPh) Article 15.

The story began with a Notice of Tax Underpayment Assessment (SKPKB) for Final PPh Article 15 for the December 2021 Tax Period issued by the DJP. The DJP made a significant correction to the Tax Base (DPP) for Final PPh Article 15 amounting to Rp12,100,079,700.

The DJP found data in the Shipping Cost account (Account No. 510-30) in PGL's bookkeeping. According to the DJP, as the party paying for shipping services to a domestic shipping company, PGL should have been obligated to withhold/collect Final PPh Article 15 on that transaction. Since PGL did not do so, the DJP imposed a total tax due and penalties reaching Rp183.5 Million.

PGL, feeling it had made no mistake, immediately filed an objection. PGL's main business is Freight Forwarding Services (JPT). PGL's task is to act as an intermediary that handles shipping goods from A to B, including finding shipping or trucking vendors.

PGL argued that the DJP's correction was baseless and based only on assumptions. PGL had two main points that became key to the dispute:

1. Tax Already Paid (Self-Assessment): PGL claimed that the Final PPh Article 15 obligation had been fulfilled by the Shipping Company (vendor) itself through a self-assessment mechanism.
2. Nature of the Transaction: PGL firmly stated that they did NOT charter or rent a ship from the shipping company. Instead, they only used a portion of the ship's space in a general manner (purchasing general cargo space), and the nature of the transaction was an outright sale (without any specific engagement).

The Tax Court stepped in to adjudicate this dispute, described as a matter of legal interpretation and evidence.

After examining the evidence and hearing testimony from the parties, the Panel of Judges focused on the regulations for Final PPh Article 15 for Domestic Shipping Companies (based on KMK-416/1996 jo. SE-29/1996).

The Panel found a crucial difference in the mechanism for settling PPh Article 15:

1. If there is a charter (lease) agreement, then the paying/chartering party (the Appellant/PGL) is obligated to withhold Final PPh Article 15.
2. If the income is obtained OTHER THAN from a charter agreement (such as an outright sale transaction), then the Shipping Company (vendor) is obligated to self-assess and pay the due Final PPh Article 15.

Since the facts revealed in the trial proved that PGL's transaction with the shipping vendor was not a charter but an outright sale, the Panel of Judges was of the opinion that the party obligated to pay the Final PPh Article 15 was the shipping company vendor itself.

Based on the assessment of evidence and the Judges' conviction, the DJP's correction of the DPP for Final PPh Article 15 amounting to Rp12,100,079,700 could not be upheld because PGL had no obligation to perform withholding/collection on that transaction.

This victory affirms that in the Freight Forwarding Services (JPT) industry, utilizing shipping services is not automatically considered a charter or ship rental. If the transaction that occurs is the purchase of cargo space (space charter or outright sale) and not the lease of an entire ship, then the obligation for Final PPh Article 15 shifts from the service user (PGL) to the service provider (Shipping Company) for self-assessment payment.

This ruling serves as an important guide for other logistics companies to ensure that the identification of the nature of their transactions with shipping companies is correct to avoid disputes over withholding/collection of Final PPh Article 15.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here