Taxpayer Wins Unconditionally: DJP's USD 175K Revenue Correction Annulled Due to Failure to Meet Evidential Requirements under the Indonesian Tax Law (KUP)

The positive correction of Operating Revenue amounting to USD 175,249.00 imposed by the Directorate General of Taxes (DJP) on PT FEID was entirely annulled in this Tax Court Decision. The dispute centered on discrepancies discovered through the equalization method between the VAT Output Tax Base (DPP) and the Revenue in the Corporate Income Tax (CIT) return. While the DJP claimed the discrepancy represented unreported income, the Panel of Judges ruled that the correction was invalid because it was not supported by evidence of actual additional economic capacity as required by Article 12 paragraph (3) of the General Provisions and Tax Procedures Law (UU KUP).

The core conflict began when the DJP upheld a correction derived from the equalization difference. The DJP argued that PT FEID failed to prove that the two main items (Commission of USD 17.00 and Sales of USD 175,232.00) were correctly reported. Specifically, the DJP rejected PT FEID’s argument that the sales item was 2018 income, citing that the relevant Tax Invoices and invoices were issued and recorded as sales in 2017. The DJP’s argument relied heavily on formal compliance, even rejecting new detailed evidence presented by PT FEID at the appeal stage (Article 26A UU KUP).

However, the Panel of Judges comprehensively upheld PT FEID’s rebuttal. The Panel stated that a correction based merely on an equalization difference (flow test) is an act of shifting the burden of proof onto PT FEID. According to the principle of tax law, the DJP is obliged to prove first that the difference genuinely constitutes additional economic capacity subject to tax. The lack of detailed correction specifics from the DJP during the examination and objection stages was also highlighted as the reason PT FEID was forced to modify its supporting details repeatedly.

PT FEID, despite the fluctuating details, successfully convinced the Panel that the USD 175,249.00 difference was essentially due to administrative issues, such as duplicate Tax Invoices for advance payments that were not cancelled, timing differences in recognition (VAT on advance vs. CIT accrual basis), and exchange rate differences arising from using the bookkeeping rate versus the Minister of Finance (KMK) rate for VAT reporting. Consequently, as the DJP could not provide clear and specific evidence, the correction was deemed to fail the evidential requirements of Article 12 paragraph (3) UU KUP. This decision sets a strong precedent for taxpayers to demand clear correction details and to reject corrections based solely on equalization assumptions.

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