Input VAT Correction Canceled by DJP Despite Dormant Company: The Successful Appeal Based on Internal Tax Confirmation Evidence

The Tax Court Judges' decision in Ruling Number PUT-004957.16/2021/PP/M.XVIIIA Tahun 2025 provides a crucial clarification regarding the interpretation of Article 9 paragraph (8) letter b of the Indonesian VAT Law, specifically concerning the phrase "not having a direct relationship with business activities." This case involved PT BML (the Appellant) whose Input Value Added Tax (VAT) was corrected because the company reported Zero turnover for the October 2015 tax period. This correction, which resulted in a 100% administrative penalty under Article 13 paragraph (3) of the KUP Law, was strongly opposed by the Taxpayer, arguing that the incurred costs were essential for maintaining the company's going concern status.

Core Conflict: Procedural Grounds vs. Substantive Continuity

The core conflict in this dispute centered on the dual nature of the rejection by the Respondent (DJP). The DJP disallowed the crediting on procedural grounds, claiming the Appellant failed to submit complete documentation during the audit, and on substantive grounds, because the Zero turnover indicated a lack of direct relationship with the taxable supplies of goods or services. The Appellant countered by showing that although production was halted, expenses like employee salaries and logistics consulting services were still part of the operating activities, and the disputed Input VAT invoices were materially valid.

Legal Resolution: A Broad Interpretation of Business Activities

The legal resolution provided by the Judges effectively nullified the DJP's substantive argument. The Panel held that the definition of business activities must be interpreted broadly, encompassing all activities supporting the company's continuity, not merely the sales-generating activities of that specific period. The ruling was heavily anchored in the results of the PKPM (Input Taxable Entrepreneur Confirmation) carried out by the DJP itself, where the disputed Input VAT transaction of Rp1,450,000.00 was confirmed as "existing" or materially valid. The fact of this internal confirmation outweighed the correction basis that relied solely on the lack of turnover, leading the Panel to grant the appeal in its entirety.

Implications: Superior Weight of Material Validity

The implication of this decision for tax practice affirms that the material validity of Input VAT Invoices confirmed by the tax authority carries superior evidentiary weight compared to a rigid interpretation of Article 9 paragraph (8) letter b of the VAT Law. This ruling sets an important precedent that protects the Taxpayer's right to credit valid Input VAT, even when the company is in a period of operational suspension, provided that the expenses can be proven to be aimed at maintaining the business continuity. This serves as a reminder for Taxpayers to always maintain correspondence and the validity of their VAT Invoices, as PKPM confirmation can be the key to success in Input VAT crediting litigation disputes.