Buyers Are Not Guarantors of Seller's Tax Deposits: Winning a Tax Appeal on "Non-Existent" Confirmation Disputes 

VAT Dispute: "Non-Existent" Confirmation vs. Proof of Actual Payment (PT DH Case)

Disputes regarding Input Tax credits due to "Non-Existent" confirmation responses often unfairly burden the buyer. In the case of PT DH, the Directorate General of Taxation (DGT) corrected Input Tax for the October 2014 period amounting to IDR 65,095,613.00 solely because the counterparty had not reported the Tax Invoice in their VAT Returns. The DGT based this correction on the seller's reporting formalities as an absolute requirement for the buyer's tax credit.

Core Conflict: Joint Liability and Seller's Administrative Negligence

The core of this conflict lies in the interpretation of Article 33 of the General Tax Provisions (KUP) Law regarding joint liability. The Respondent argued that without the seller's reporting—verified through confirmation—the Input Tax cannot be legally recognized. Conversely, PT DH asserted that as a buyer, they had fulfilled their obligation to pay the VAT stated in the invoice and possessed valid evidence of cash and goods flow. The seller's administrative negligence in reporting was deemed not to be the buyer's responsibility as long as payment had been made.

Judicial Consideration: Prioritizing Economic Substance

In its resolution, the Tax Court Judges provided a progressive legal consideration by prioritizing economic substance over administrative formalities. The Panel conducted a thorough examination of the evidence submitted by PT DH, including Tax Invoices, invoices, bank statements, and work contracts. Based on the trial facts, it was found that the transaction was legitimate and the VAT had been paid by PT DH to the seller. The Judges emphasized that joint liability cannot be arbitrarily applied if the buyer can prove that tax payment was indeed made to the seller.

Analysis and Implications: Protecting Good-Faith Taxpayers

The implications of this decision provide legal certainty that the right to credit Input Tax should not be forfeited due to the administrative failure of a third party (the seller). Technically, this ruling confirms that buyers are not obliged to bear a double tax burden for taxes they have already paid. This analysis highlights the importance for Taxpayers to maintain robust evidence of cash flow as a primary defense when facing corrections due to negative invoice confirmation. In conclusion, the court favors substantial justice, ensuring that good-faith taxpayers are protected from the negligence of others.

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