Strategic Decision: Tax Court Rejects Retroactive Application of SE-26/PJ/2015 in Determination of VAT Tax Assessment Notice

Amid formal compliance requirements, taxpayers are often faced with rules that change midstream, even after transactions have been completed. This is what happened to a Taxable Entrepreneur (PKP) who had to fight a VAT Tax Bill (STP) worth IDR 208,725,739 in the Tax Court. In PUT-007892.99/2018/PP/MIIIB, the core issue lies in the issuance of a VAT Tax Assessment Letter (STP) accompanied by a penalty of 2% of the Tax Base (DPP) amounting to IDR 208,725,739. The plaintiff explained the chronology that in January 2015, PT KCI issued a tax invoice that was fully in accordance with the provisions of the VAT Law, made at the time of delivery of Taxable Goods, and contained all the mandatory elements of a tax invoice, including the invoice serial number in accordance with the current year's NSFP quota. The Plaintiff's main objection is that the DGT deemed the invoice “incorrect” solely because the invoice date was earlier than the date of the NSFP letter, with the provisions used by the DGT originating from SE-26/PJ/2015, a Circular Letter that was only issued on April 2, 2015, or three months after the disputed tax invoice was issued. This means, according to the Plaintiff, that the DGT applied rules that were not yet in effect when the invoice was created, making the application of the SE retroactive, even though PER-24/PJ/2012, as the official implementing regulation in effect at the time, never prohibited the inclusion of an invoice date prior to the date of the NSFP letter.

On the other hand, the DGT maintained that the issuance of the STP was in accordance with the provisions, arguing that tax invoices with dates earlier than the date of the NSFP letter were categorized as tax invoices containing “untrue information.” In this case, the Defendant referred to SE-26/PJ/2015, which emphasized that tax invoice serial numbers could only be used on or after the date of the NSFP letter. The DGT considered this violation to fall under the conditions stipulated in Article 14 paragraph (1) letters d, e, or f of the KUP Law, making it valid for the DGT to issue an STP with a penalty of 2% of the Tax Base.

In response to the dispute, the Tax Court Panel of Judges ruled in favor of the taxpayer. The Panel of Judges' opinion was decisive, as it emphasized that PER-24/PJ/2012, as the highest implementing regulation at that time, did not contain provisions requiring Tax Invoice Serial Numbers to be used only on or after the date of the notification letter. In the absence of such a prohibition in regulations at the level of the Director General of Taxes Regulation, the Panel of Judges ruled that the output tax invoices issued by the Plaintiff in January 2015 were complete and timely in accordance with their issuance period based on Article 13 paragraph (5) of the VAT Law. Based on this legal consideration, the Panel of Judges granted the Plaintiff's lawsuit and ordered the cancellation of all Tax Collection Letters (STP) issued with sanctions under Article 14 paragraph (4) of the KUP Law. This decision once again emphasizes the importance of the principles of legal certainty and non-retroactivity in tax administration.

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