Handling Services in FTZ: PMK vs PP, Tax Court Judges Choose to Annul VAT Correction

Tax Court Decision on Free Trade Zone VAT Facility Dispute of PT BB

Tax Court Decision Number PUT-010315.16/2021/PP/M.VIIIA Year 2025 provides a crucial affirmation regarding the application of Value Added Tax (VAT) facilities in the Free Trade Zone (FTZ). This case involved PT BB (the Appellant), which faced a VAT assessment correction (DPP) of IDR 4,892,190,000.00 for the supply of handling services within the Tembilahan Free Trade Zone.

Core Conflict and Regulatory Hierarchy Interpretations

The core conflict in this dispute centered on differing interpretations of the regulatory hierarchy. The Director General of Taxes (the Respondent) based its correction on the Minister of Finance Regulation Number 62/PMK.04/2012 (PMK-62/2012). The Respondent argued that the VAT-not-collected facility only applied to Taxable Services (JKP) explicitly listed in Attachment II of that PMK. Since handling services were not listed, the Respondent deemed the VAT to be due. Conversely, the Appellant relied on a higher regulation, Government Regulation Number 10 Year 2012 (PP 10/2012). Article 10 paragraph (1) of that PP generally states that the supply of Taxable Services within the Free Trade Zone by an Entrepreneur in the Free Trade Zone is not subject to VAT, without limiting the types of services.

Panel of Judges Consideration on FTZ Service Supply

The Panel of Judges, in its consideration, set aside the limitations stipulated in PMK-62/2012. The Panel verified the fact that the supply of handling services did occur within the Free Trade Zone, was carried out by an Entrepreneur in the Free Trade Zone (the Appellant) to another Entrepreneur in the Free Trade Zone (PT Pulau Sagu). The Panel ruled that the provisions in PMK-62/2012 that limited the types of Taxable Services were contrary to the spirit and content of PP 10/2012.

Application of Lex Superiori Derogat Legi Inferiori Principle

By applying the legal principle of lex superiori derogat legi inferiori (a higher law supersedes a lower law), the Panel of Judges annulled the Respondent's correction. This decision confirms that an implementing regulation (PMK) may not limit a facility that has been granted in general by a Government Regulation (PP), especially when the PP does not delegate the authority to make such limitations.

Implications for FTZ Taxpayers

The implication of this decision is significant for taxpayers in the FTZ. This ruling strengthens the legal certainty that the VAT facility applies to all Taxable Services supplied between Entrepreneurs within the Free Trade Zone, as long as they meet the substantive requirements stipulated in PP 10/2012, regardless of the absence of such services in the implementing PMK's attachment list.

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