Beware! Cancellation of Sale and Purchase Agreement Without Cash Flow Evidence Still Incurs 2.5 Percent Final Tax

Article 4(2) Dispute: PPJB Cancellation Claims vs. Accounting Consistency

Disputes over Article 4 paragraph (2) Income Tax on the transfer of land and building rights are often triggered by differing interpretations of substance over form and the completeness of material supporting documents. In this case, the Respondent (DJP) made a positive correction to the Final Tax Base amounting to Rp20,534,807,450.00 after discovering a significant decrease in the Petitioner’s fixed asset account in the 2018 balance sheet, suspected to be an asset sale transaction to a third party.

The Conflict: Legal Form vs. Economic Control

The primary conflict centered on the Petitioner's claim that no transfer of rights occurred, but rather a cancellation of the Sale and Purchase Agreement (PPJB) with the original landowner. The Petitioner argued that since the PPJB was canceled, the transaction was legally deemed non-existent, and the assets returned to the original owner before being sold to PT PBN. However, the Respondent emphasized that for accounting purposes, the Petitioner had recorded these assets as company property and even continued to charge depreciation expenses during the current year, implicitly acknowledging economic control over the assets.

Judicial Rationale: The Burden of Proof and the Missing Refund Link

The Board of Judges, in their legal consideration, emphasized the burden of proof according to Article 13 paragraph (1) of the KUP Law. The Judges found that the Petitioner failed to provide comprehensive cash flow evidence, such as bank statements recording refunds from the original owner due to the PPJB cancellation. The inconsistency between the legal cancellation claim and the accounting treatment (depreciation) reinforced the Respondent's position that an economic transfer had occurred, which is a taxable object.

Conclusion: Documentary and Cash Flow Integrity

The implication of this decision confirms that legal documents such as cancellation deeds or certificates in another party's name are not strong enough if not supported by synchronous cash flow evidence. For companies, consistency between accounting treatment (depreciation) and tax reporting is crucial. Failure to present evidence of payment or refunds during trial will result in the rejection of the appeal, even if the land certificate was never formally in the Taxpayer's name. Tax regulation enforcement continues to refer to the availability of valid supporting documents during the audit and objection stages.