Tax Court Cancels Rp18.7 Billion Correction on Land Swap Transaction of PT ML

Tax disputes often center on differences in how to assess a transaction, and this is what happened to PT M.L., a company operating in the property sector. The company had to face the tax authority, the Respondent (Director General of Taxes), after the value of their land swap (exchange) transaction was deemed too low, resulting in the issuance of an Underpaid Tax Assessment Letter (SKPKB) for Final Income Tax Article 4 Paragraph (2) for the December 2017 Tax Period.

The story began with a land swap transaction involving a 12,640-square-meter plot owned by PT ML with several plots owned by PT NKRE at the end of 2017. According to the transaction documents, PT ML reported the transfer value of its land at Rp 14,498,080,000. This value resulted in a Final Income Tax Article 4 Paragraph (2) payable of Rp 372,983,064. 

However, the North Jakarta Regional Tax Office of DJP, acting as the Respondent, had a different view. Referring to Article 2 Paragraph (2) of Government Regulation Number 34 of 2016, the value of the transfer of land rights in an exchange case must be based on market price. The tax authority then requested assistance from the Tax Appraisal Team of the DJP Regional Office to determine the actual market value. The DJP Team's appraisal results showed that the market price of PT ML's land was much higher, at Rp 33,204,951,360. This stark difference of Rp 18,706,871,360 was then corrected and used as an additional Tax Base (DPP). This correction caused the total tax still payable, including administrative sanctions, to soar to Rp 671,950,820.

Disagreeing with the correction, PT ML filed an objection which was subsequently rejected by the Respondent. The company then brought the dispute to the Tax Court. In the appeal process, PT M.L. argued that this land swap transaction was not influenced by any special relationship. Furthermore, they also referred to the Public Appraisal Services Office (KJPP) IB & Partners, whose report concluded that the market value of their land was only Rp 12,008,000,000. This value according to the KJPP was even lower than the value they used in their tax return.

After considering all evidence and testimonies, the Tax Court stated and was convinced that the land swap transaction was indeed a transaction not influenced by a special relationship, as regulated in Article 10 Paragraph (1) of the Income Tax Law. The judge highlighted that the Respondent's Tax Appraisal Team in making the correction based the land value on advertised property listings, not on values regulated by provisions such as the Tax Object Sale Value (NJOP) or other valid transaction data.

Therefore, the Tax Court held that the correction of the Article 4 Paragraph (2) Income Tax DPP amounting to Rp 18,706,871,360 made by the Respondent was not in accordance with applicable regulations.

In its final decision, the Panel of Judges decided to Grant in Full the Appeal filed by PT ML. This decision effectively cancels all corrections by the Respondent, restores the Final Income Tax Article 4 Paragraph (2) DPP to Rp 14,603,390,644, and sets the Amount of Income Tax still payable (including administrative sanctions) to Rp 0.

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