The mining sector, as a key strategic industry, frequently faces complex tax disputes, particularly concerning Withholding Tax (WHT) Article 23 on Other Services. Tax Court Decision Number PUT-001068.35/2024/PP/M.XXB Tahun 2025, which partially granted the appeal of PT STLI, establishes an important jurisprudence highlighting the necessity for Taxpayers to possess robust transaction substance documentation, especially for services prone to interpretation as WHT Article 23 objects, as regulated under Minister of Finance Regulation (PMK) Number 141/PMK.03/2015 regarding Types of Other Services. This decision shows that formal compliance (WHT slips) must be balanced with the ability to provide material proof of the nature of the transaction.
The Directorate General of Taxes (DGT) imposed a positive correction on the WHT Article 23/26 Tax Base (DPP) over service fees paid by PT STLI to third parties. In the context of mining services (such as hauling or exploration), the DGT argued that these payments fall within the definition of "Other Services" subject to WHT Article 23 at a rate of 2% of the gross amount. The DGT relied on the principle of legal certainty and the formality of tax withholding, where the Taxpayer, as the payer, is responsible for the tax not withheld or under-withheld.
PT STLI vehemently refuted the correction, arguing that the service transactions being corrected were in fact subject to another Final Income Tax regime, namely Final PPh Article 4 paragraph (2), or constituted the sale of goods (not services), or the recipient’s Corporate Income Tax obligations had already been fulfilled. The Taxpayer's argument sought to shift the tax base from non-final WHT Article 23 to a different Final Income Tax regime, or to nullify the object altogether based on the substance of the contract in the field.
The Panel of Judges, after examining the evidence submitted, decided to partially grant the Taxpayer's appeal. Regarding the Mining Services dispute item, the Panel revoked the DGT's correction. The key consideration was that the Taxpayer successfully proved conclusively, through contract documents and financial reports of the third party (the income recipient), that the tax due on the service had been paid and reported, or the service was specifically regulated under other Final PPh provisions, thus the WHT Article 23/26 correction could not be maintained. This annulment suggests that the Panel prioritized material truth over a mere formal lapse (the absence of a WHT slip) when the Taxpayer could prove no loss to state revenue. However, some corrections were upheld because the Taxpayer failed to provide convincing formal or material proof for other dispute items.
This decision reinforces the doctrine that in withholding/collection disputes, the Taxpayer’s burden of proof is not limited to formal compliance (possession of WHT Slips) but must also be capable of proving the material truth that the income paid is not an object of WHT Article 23/26 or has been subjected to a final income tax. The implication for Taxpayers in the mining sector is the obligation to formulate service contracts with third parties in meticulous detail, clearly separating what constitutes a service (WHT Article 23 object), what is Final PPh, and what constitutes a sale of goods, while also ensuring the subcontractor’s tax compliance is sound.
The Partially Granted decision in this WHT Article 23/26 dispute confirms that the validity of a tax correction heavily relies on the quality of evidence presented by the Taxpayer at trial. The success of PT STLI in revoking a portion of the correction demonstrates that comprehensive documentation and an argument supported by specific Final PPh provisions are key to winning tax disputes at the Tax Court.
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