Purchase of FFB Through the Farmers' Cooperative Administrative Coordinator (for) Transactions Not Subject to PPh 22

The tax dispute in Tax Court Decision Number PUT-009066.11/2021/PP/M.IIA Yar 2025 originated from a correction made by the Directorate General of Taxes (DGT) against PT CG on the Tax Base (DPP) of Income Tax (PPh) Article 22, amounting to Rp12,857,398,834.00. The correction was formalized in Underpaid Tax Assessment Letter (SKPKB) Number 00004/202/18/073/20 dated April 27, 2020, with the remaining tax payable reaching Rp424,204,170.00, consisting of the principal tax and interest penalty.

According to the DGT, the purchase of Fresh Fruit Bunches (FFB) of oil palm by PT CG from Koperasi CTS (CTS Cooperative) should have been subject to PPh Article 22 collection. The DGT argued that the cooperative is a legal entity that serves as the counterparty to the transaction, while the monthly FFB purchase value exceeded the Rp20,000,000.00 limit, thus failing to meet the exclusion requirements as stipulated in PPh Law Article 22 in conjunction with Minister of Finance Regulation (PMK) No. 34/PMK.010/2017.

However, PT CG filed an objection and subsequently an appeal, arguing that the FFB purchase transaction was not a purchase from the cooperative as a business entity, but rather from plasma farmers whose harvests were coordinated by the cooperative. The cooperative, in this case, only acted as an administrator or payment intermediary between the company and the farmers. Furthermore, the purchase value per farmer was always below Rp20,000,000.00 per tax period, thus falling under the PPh Article 22 exclusion.

PT CG also highlighted that the correction amounting to Rp12,857,398,834.00 was never listed in the Notice of Tax Audit Results (SPHP) but appeared directly in the SKPKB without giving PT CG an opportunity to respond to the audit results. This rendered the SKPKB procedurally flawed as regulated in PMK 184/PMK.03/2015 and DGT Circular Letter (SE) SE-6/PJ/2018.

During the trial, PT CG successfully presented substantive evidence in the form of FFB purchase recapitulations, invoices from the cooperative, and a statement letter from the cooperative clarifying that the harvest belonged to the plasma farmers, not the cooperative. The payment to the cooperative was merely administrative. Based on these facts, the Panel of Judges ruled that the transaction did not constitute an object of PPh Article 22, as it met the exclusion criteria for purchases of plantation products from small farmers.

The Panel also affirmed that the DGT was mistaken in designating the cooperative as the tax collector subject and could not prove that the payment was made to the cooperative as the seller of the goods. The correction made without notification through the SPHP was also deemed a violation of the procedural principles of fair and transparent tax auditing.

Based on these considerations, the Tax Court Panel of Judges granted all of PT CG's appeal requests and cancelled the PPh Article 22 SKPKB in question, thereby reducing the remaining tax payable to Rp0.00. 

This decision affirms that the application of PPh Article 22 cannot be done formalistically, but must consider the economic substance of the transaction. The purchase of agricultural products from plasma farmers through an administrative cooperative cannot be considered a purchase from a business entity subject to tax collection.

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