The Respondent adjusted the Tax Base (DPP) for Article 21 Income Tax by IDR 4,914,017,652.00 using a cost equalization method from the financial statements, which were deemed taxable withholding objects owed by PT AN. This dispute centers on the classification of shared allocation costs (sharing cost) for resort management operations involving affiliated entities. The tax authorities insisted that any cost charged in the books of different legal entities automatically triggers an independent withholding tax obligation according to its designation.
However, PT AN consistently proved that these costs were purely reimbursements for employee salary payments previously advanced and tax-withheld by PT BGK. During the trial, it was revealed that there was no mark-up in the billing. The Board of Judges emphasized that the essence of this transaction was the sharing of collective cost burdens, where the state obligation of Article 21 Income Tax withholding had already been fulfilled by the party that actually made the payment to the income recipient.
The Board of Judges opined that the equalization method used by the Respondent must not ignore material facts and economic substance. Referring to MoF Regulation (PMK) Number 141/PMK.03/2015, cost reimbursements to third parties who have paid in advance are not subject to withholding tax as long as the truth can be verified. This decision reaffirms the importance of clear sharing cost agreement documentation and synchronized cash flow evidence to avoid double taxation on the same object. Consequently, Taxpayers must ensure that every inter-company transaction is supported by strong evidence to rebut automatic assumptions from equalization results.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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