Stumbling on a Courtroom Admission: IDR 4.2 Million WHT Article 23 Correction Upheld Despite Claims of Procedural Flaw

The application of the Indonesian Withholding Tax (WHT) Article 23 provisions is once again a critical issue in tax litigation, as reflected in this Tax Court Decision. The case, involving PT GB, highlights a dispute over a WHT Article 23 payable correction of IDR 4,280,184.00 arising from Prizes and Awards and Management Services expenses. While the disputed amount is relatively minor, the implications of this decision are significant because the focus of the Panel of Judges was not on the substance or examination procedure but on the courtroom mechanism itself.

The core of the conflict originated when the Directorate General of Taxes (DJP) performed a reclassification of a correction from Final Income Tax (PPh Final) to WHT Article 23, a move strongly contested by PT GB. The DJP argued that the correction was valid based on data found and PT GB's failure to present valid withholding slips or a Tax Exemption Certificate (SKB) for WHT Article 23, particularly from the counterparty. Conversely, PT GB challenged the correction, citing a procedural defect because the new WHT Article 23 correction was not listed in the initial Statement of Tax Examination Results (SPHP) and was not adequately discussed. A material challenge was also asserted, claiming that the withholding obligation was negated by the counterparty's ownership of a valid WHT Article 23 SKB.

In resolving the dispute, the Tax Court Panel chose a formal-procedural route. The Panel did not delve into the merits of whether the Prizes, Awards, and Management Services were subject to WHT Article 23 or whether the claimed SKB existed. The Panel's legal consideration exclusively relied on Article 74 of the Tax Court Law. This article stipulates that an admission or statement made by parties during the trial is binding and cannot be withdrawn without a compelling reason.

The analysis of the decision indicates that the legal counsel for PT GB, during the hearing on April 28, 2025, explicitly and unequivocally stated that they would not proceed with the appeal regarding the entire WHT Article 23 dispute. This single statement became the deciding factor in PT GB's loss. The Panel of Judges deemed the statement a binding admission, and since PT GB provided no strong reason to withdraw it, the DJP's correction was automatically upheld. The impact of this decision is profound, affirming that trial management and prudence in every verbal statement before the Panel of Judges are as important as, if not more important than, the material arguments prepared. The implication for tax practice is the necessity for Taxpayers and consultants to heighten vigilance at every stage of litigation so that a procedural error in the courtroom does not overturn the substantive arguments that have been carefully constructed.

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