DJP Denies Interest Refund, Taxpayer Fights Back via Article 36 of UU KUP Path and Wins in Tax Court

This Tax Court Decision establishes a significant precedent regarding the interpretation of a Taxpayer's right to an interest refund under Article 27A paragraph (1a) of the General Tax Provisions and Procedures Law (UU KUP). This case confirms that the right to compensation for delayed tax refunds is not limited to legal products like Objections or Appeals, but can also arise from a Decree (SK) based on Article 36 of the UU KUP.

The dispute began when PT PSI filed for an interest refund on a tax overpayment. This overpayment arose after the Director General of Taxes (DJP) issued a Reduction Decree based on Article 36 paragraph (1) letter b of the UU KUP, which effectively acknowledged an overpayment of Rp. 4,398,000.00.

The conflict arose when the DJP rejected the interest refund application via Letter S-1645/WPJ.07/KP.05/2018. The DJP's main argument was that Article 27A paragraph (1a) of UU KUP limitatively states that interest refunds are only granted for overpayments resulting from an Objection Decree, an Appeal Decision, or a Judicial Review Decision. Because PT PSI's overpayment originated from an Article 36 KUP Decree, the DJP viewed PT PSI as not meeting the formal requirements.

PT PSI rejected this literal interpretation and filed a lawsuit. PT PSI's argument focused on the substance of justice, asserting that the state had already acknowledged the overpayment. Denying interest compensation merely due to a different administrative path was seen as undermining the principle of fairness.

The Tax Court Panel (Majelis XXB) in its decision granted PT PSI's lawsuit in its entirety. The panel set aside the DJP's rigid interpretation and validated PT PSI's right to the interest refund. In its verdict, the Court stipulated the interest calculation at Rp. 2,111,040.00, calculated from the base amount of Rp. 4,398,000.00 at a rate of 48% (the maximum accumulation of 24 months).

This decision has a significant impact on tax administration. It reinforces the principle that a Taxpayer is entitled to interest compensation as long as the tax overpayment has been formally acknowledged by the authority, regardless of the legal mechanism that caused it. For Taxpayers, this decision serves as strong jurisprudence to proactively apply for interest refunds arising from non-traditional paths, such as Article 36 of the UU KUP, and underscores the importance of substantive arguments in court.

In conclusion, this decision affirms that substantive justice must prevail over procedural rigidity in the granting of interest refund rights, aligning with the principle of fairness in the tax system.

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