Employee Drinking Water Can Be Credited, but Beware of the 3-Month Tax Invoice Deadline!

Implementation of Article 9 Paragraph (8) Letter b of the VAT Law

The implementation of Article 9 paragraph (8) letter b of the VAT Law often becomes a point of dispute between Taxpayers and the Directorate General of Taxes (DJP), specifically regarding the interpretation of expenses directly related to business activities. In decision number PUT-003925.16/2024/PP, the Tax Court Judges provided crucial clarification regarding the boundaries of management expenses and the formal aspects of Tax Invoice issuance timing that must not be exceeded.

Dispute on Drinking Water Costs and Audit Services

The dispute began when the Respondent (DJP) corrected the Input VAT of PT MTI regarding drinking water costs and audit services, arguing they were not directly related to business activities. The Respondent held a narrow interpretation that these costs were merely general expenses. However, the Applicant (PT MTI) successfully convinced the Court that drinking water is part of the Occupational Health and Safety (K3) standards and audit services are an integral part of the management's controlling function. The Judges agreed that these expenditures met the criteria of Article 9 paragraph (8) letter b of the VAT Law as management activity expenses.

Formal Aspects and Delayed Tax Invoice Issuance

However, this success did not extend to the software maintenance service post. The Judges found that, materially, the services were completed in September 2020, yet the Tax Invoice was only created in April 2021. Based on Article 19 of Government Regulation (PP) Number 9 of 2021, a Tax Invoice created more than 3 months after it should have been issued cannot be credited. This ruling emphasizes that even if an expense is substantively related to the business, administrative negligence regarding timing can disqualify the right to a tax credit.

Conclusion and Administrative Compliance

In conclusion, Taxpayers must conduct strict curation of service delivery documents. The victory on the management expense post proves the importance of logical operational arguments, while the loss on the late invoice post teaches that administrative compliance under GR 9/2021 is a non-negotiable requirement to avoid financial losses from tax corrections.