Not About Farmers, Tax Court Rules IUP Legality is Key for Tin Withholding Agent

Amid the hustle and bustle of the tin mining industry in Bangka Belitung, the Tax Court recently affirmed a strict, yet logical, decision for PT BT. This case, numbered PUT-003722.11/2024/PP/M.IIIA Year 2025, is not merely a matter of underpaid taxes, but a fierce battle between formal compliance on paper versus the reality of community mining on the ground.

In the end, the Court decided that regulatory logic must prevail, rejecting PT BT's appeal and upholding the total tax bill of Rp 194,219,069.

The core of this dispute originated from a correction to the Tax Base for Article 22 Income Tax for the July 2018 Tax Period, amounting to Rp 8,966,716,000. This correction arose because the Respondent (the Director General of Taxes) found transactions of tin sand purchases that were deemed not to have been subject to Article 22 Income Tax withholding by PT BT.

The Company's Defense: PT BT filed an appeal with an argument that seemed humane and rational: they bought the tin commodity from farmers or individuals who did not have a Mining Business License (IUP). According to PT BT, based on PMK (Minister of Finance Regulation) Number 34/PMK.010/2017, Article 22 Income Tax must only be withheld from sellers who possess an IUP. Since the sellers were non-IUP farmers, the obligation to withhold Article 22 Income Tax was considered non-existent.

The company even revealed a complex business flow: farmers mined on a concession land owned by another party (CV BMP). The farmers could not sell legally without a mobilization permit (Surat Jalan/SJ) from the concession owner. PT BT, as the buyer, ultimately paid a fee to the IUP holder to obtain the permit so that the buying and selling transaction with the farmers became 'legal'.

PT Bukit Timah's argument, which detailed the complexity of this local supply chain, backfired in the eyes of the Court.

The Court's Reasoning: The Panel of Judges firmly held onto the Mining Mineral and Coal Law, which explicitly prohibits any party, including farmers, who do not possess an IUP from selling minerals or coal.

In its ruling, the Tax Court stated:

"That regarding PT BT's opinion which stated that the purchase was made from an individual who is not an IUP holder, the Court is of the opinion that PT BT's argument actually reveals a legal violation and contradicts Article 105 paragraph (1) and Article 161 of the Mining Mineral and Coal Law."

If PT BT purchased tin which was then exported, the raw material, based on documents, must originate from a legal source that has an IUP/CnC. In this case, the Court concluded that the purchase essentially originated from the IUP holder, namely CV BMP, in accordance with formal documents (such as delivery orders).

In other words, PT BT cannot hide behind illegal or semi-legal practices in the field to avoid tax obligations. Tax rules (Article 22 Income Tax) must align with sectoral rules (the Mining Law).

Procedural Defect Argument Dismissed: PT BT also alleged that the Tax Assessment Notice (SKPKB) they received was legally and procedurally flawed because the tax audit process conducted by the DJP exceeded the stipulated time limit.

However, the Tax Court dismissed this argument, citing the General Provisions and Tax Procedures Law and the Tax Court Law. Objections regarding procedural issues in the issuance of tax assessment notices (such as the audit time limit) must be filed through a Lawsuit mechanism, not an Appeal.

Thus, PT BT was deemed to have chosen the wrong legal avenue, and therefore its procedural defect argument was not considered.

Finally, the Panel of Judges rejected all of PT BT's appeal petitions, affirming that the DJP's arguments were correct and based on sufficient legal grounds.

This decision serves as a firm reminder for the entire commodities industry: regardless of the complexity and reality of field practices, formal compliance with the mining licensing regime and tax withholding obligations is absolute and non-negotiable.

Comprehensive Analysis and the Tax Court's Decision on This Dispute is Available Here