PT SPD Successfully Cancels Final Tax Correction Based Solely on Other Party’s Audit Reports

Final Income Tax Dispute on the Transfer of Land and Building Rights of PT SPD

PT SPD faced a tax dispute regarding Final Income Tax under Article 4 paragraph (2) on the transfer of land and/or building rights for the July 2019 Tax Period. This dispute was triggered by the Respondent's correction of IDR 1,332,909,091, which was based on audit findings from an affiliate PT SA for the 2017 tax year. The Respondent utilized an extrapolation of external data to determine a market value that was deemed reportable, despite the lack of evidence of actual transactions during the disputed tax period.

The Core Conflict: Interpretations of the Gross Tax Base

The core conflict centered on differing interpretations of the gross tax base. The Respondent argued that based on Government Regulation Number 34 of 2016, the transfer value must reflect the actual market value, which in this case was derived from land acquisition cost references in the parent company's audit report. Conversely, PT SPD asserted that the value reported in the Sale and Purchase Deed (AJB) was the actual transaction value. The Petitioner also chronologically proved that the corrected transaction had actually occurred and been reported in 2017, making the reassessment in the July 2019 Tax Period an administrative and substantive error.

Judges' Consideration: Principles of Legal Certainty and Objectivity

The Board of Judges, in its legal considerations, emphasized the principles of legal certainty and objectivity of evidence. The Judges opined that the Respondent was unable to demonstrate any cash flow or economic gain received by the Petitioner in July 2019. The use of another party's audit data without verifying concrete transactions in the current tax period was deemed to fail the material evidence standard. The Board emphasized that Final Income Tax under Article 4 paragraph (2) is imposed on income actually received from the transfer of rights at the time the transaction occurs.

Implications and Conclusion for Property Developers

The implications of this decision are significant for property developers. This ruling confirms that tax authorities cannot unilaterally determine transfer values based solely on internal group comparison data without proving the realization of income during the relevant tax period. In conclusion, the orderliness of AJB documentation and evidence of payment receipt remain the primary keys for Taxpayers in defending their legal position against presumptive corrections.

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