Named "Hotel" but Licensed as "Apartment"? How PT TTL Residences Won a Multi-Billion Rupiah Input VAT Dispute!

Input VAT Dispute of PT TR: Serviced Apartment Classification and Legality of Crediting Rights Over Hotel Service Corrections

The Value Added Tax (VAT) dispute between PT TR and the Directorate General of Taxes (DGT) culminated in a debate over business activity classification, which directly impacts the right to credit Input VAT. The Respondent issued a correction of IDR 7,763,361,213.00, claiming that PT TR substantively operates hotel services—a non-taxable service under Article 4A paragraph (3) letter i of the VAT Law. Consequently, the DGT argued that Input VAT on the construction of supporting facilities could not be credited pursuant to Article 13 of the VAT Law.

The Core Conflict: "C Hotel Residence" Nomenclature vs. Legitimate KLU 68110 Serviced Apartment Permits

The core of the conflict centered on the interpretation of "service characteristics." The Respondent argued that the facilities provided by PT TR resembled a hotel, further supported by the project name "C Hotel Residence" listed on Tax Invoices from the contractor, PT TI. Conversely, the Taxpayer (WP) asserted that its legal identity is a Serviced Apartment provider (KLU 68110), which is a VAT-able object. The Taxpayer proved that although the project name contained the word "Hotel," all primary permits, building permits (IMB), and operational documents referred to apartments; thus, crediting Input VAT for construction costs was legitimate as it directly related to VAT-able business activities.

Judges' Legal Considerations: Prioritizing Substance Over Form and Verifying Local PB1 Tax Compliance

The Board of Judges, in their legal considerations, prioritized the principle of substance over form, supported by formal evidence. The Board ruled that the classification of hotel services exempt from VAT must refer to local tax regulations. Evidence presented in court showed that PT TR was not registered as a hotel taxpayer and did not collect local hotel tax (PB1). The Board also validated that the nomenclature error on the Tax Invoices did not invalidate the right to credit VAT, provided that the flow of goods and money was verifiable and referred to a valid asset construction contract.

Ruling Implications: Total Victory for Capital Goods and Precedent for Mixed-Use Property Industries

This legal resolution provides certainty that the classification of a tax object cannot be determined unilaterally by authorities without considering the legality of permits and actual tax collection practices. The total victory for PT TR reaffirms that Input VAT related to the acquisition of capital goods for VAT-able businesses must be grantable. The implications of this decision serve as a crucial precedent for the mixed-use property industry in mitigating VAT correction risks caused by project naming ambiguities.

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