Beware of Litigation Risk: Why Your Appeal Penalty is Impossible to Waive by the DGT

The Tax Court Decision Number PUT-011706.99/2023/PP/M.XB Tahun 2025 underscores the principle of prudence in Indonesian tax litigation, particularly concerning the administrative penalty known as the Collection Penalty under Article 27 paragraph (5d) of the General Provisions and Tax Procedures Law (KUP Law). This penalty, which serves as a financial consequence of an appeal rejection, is explicitly excluded from the scope of penalties eligible for waiver via taxpayer petition, as stipulated by Article 4 letter b of the Minister of Finance Regulation Number 8/PMK.03/2013. This legal implication effectively closes the door for taxpayers to use the administrative route to mitigate the high-risk penalty arising after the appeal process, making it a critical point in dispute management.

The core conflict in this case centers on the hierarchy of Indonesian statutory regulations.

The Directorate General of Taxes (DGT) rejected the taxpayer's (Plaintiff's) second petition for the waiver of the collection penalty, relying heavily on PMK 8/PMK.03/2013, which specifically excludes this penalty from administrative relief. Conversely, the taxpayer argued that the exclusion mandated by the PMK (a sub-statutory regulation) contradicted the general right provided in Article 36 paragraph (1) letter a of the KUP Law (a superior regulation). The Plaintiff invoked the principle of Lex superior derogate legi inferiori, asserting that the law should prevail over the regulation. This collection penalty itself arises because of the delayed payment of tax liabilities due to the Appeal process, which was ultimately denied.

The conflict was resolved by the Legal Considerations of the Panel of Judges.

The Panel rejected the taxpayer's legal arguments and sided with the DGT. The Tax Court interpreted the phrase "may reduce or waive administrative penalties... in accordance with the provisions of tax laws and regulations" in Article 36 paragraph (1) letter a of the KUP Law not as an absolute right, but as a mandate to the Minister of Finance to further regulate its implementation. Consequently, PMK Number 8/PMK.03/2013 was deemed a valid implementing regulation that does not violate the KUP Law. The DGT's decision to deny the petition for penalty waiver was thus considered correct and in line with the prevailing legal framework.

The analysis and impact of this decision provide important legal certainty for taxpayers currently undergoing or planning litigation.

The ruling emphasizes that the Article 27 paragraph (5d) KUP Collection Penalty is not an ordinary penalty but a form of compensation for the state's deferred right to revenue. By rejecting this lawsuit, the court compels taxpayers to conduct a more rigorous financial risk analysis before deciding to file an Appeal or Lawsuit, as this specific penalty is exclusive and cannot be mitigated through administrative waiver petitions. Paying the principal tax liability before filing an appeal remains the only effective way to prevent the accrual of this penalty should the final court decision reject the taxpayer's claim.

The jurisprudential conclusion is that the exclusion of the Article 27 paragraph (5d) KUP penalty from the waiver mechanism is firmly established in Tax Court practice.

For practitioners and taxpayers, the primary focus must shift from post-rejection administrative efforts to proactive risk management, including careful litigation evaluation and appropriate payment strategies, to avoid the severe and non-waivable financial consequences of this collection penalty.

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