IDR 1.1 Billion Entertainment Expense Dispute Won: The Power of Detailed Nominative Lists Revealed!

The Panel of Judges granted the Corporate Income Tax appeal regarding entertainment expenses valued at IDR 1.12 billion in Decision Number PUT-007263.15/2021/PP. The favorable outcome for PT EN (the Appellant) was determined by the completeness of the Nominative List (Daftar Nominatif - DN) presented during court proceedings, which was deemed to satisfy both formal and material requirements under Circular Letter SE-27/PJ.22/1986.
This dispute originated from an adjustment made by the Respondent (Directorate General of Taxes) regarding Corporate Income Tax Entertainment Expenses for FY 2018. The Respondent asserted that the Nominative List submitted by the Appellant during the tax audit failed to comply with SE-27/PJ.22/1986 because it lacked specific details, merely listing generic descriptions such as "Business Relation." Consequently, the tax authority raised doubts regarding the direct connection between these costs and activities aimed at deriving, recovering, and preserving income (the 3M principle).
The Appellant refuted these claims, maintaining that a complete Nominative List—including specific names of business contacts, positions, company names, and industry sectors—had indeed been provided. During the court hearings, the Appellant re-submitted and demonstrated this detailed Nominative List as evidence.
The Panel of Judges resolved the issue by overturning the Respondent's adjustment. The Panel held that the detailed Nominative List presented in court met all formal and material requirements prescribed by SE-27/PJ.22/1986. Furthermore, the Respondent failed to prove that the entries within the Nominative List were inaccurate or false.
An analysis of this decision highlights the critical importance of rigorous administrative compliance for Taxpayers. In entertainment expense disputes, the strength of formal proof via detailed Nominative Lists often serves as the deciding factor. While failure to record specific business relation details can lead to adverse fiscal adjustments, maintaining a comprehensive Nominative List acts as an indispensable defense in tax litigation.
In conclusion, entertainment expenses remain fully deductible before the Tax Court provided that Taxpayers can present detailed Nominative Lists aligned with SE-27/PJ.22/1986, thereby substantiating the direct correlation between the expenses and business operations.

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