Risk Alert! Incoming Bank Transfers Categorized as VAT Objects Due to Lack of Accounts Receivable Evidence 

VAT Base Correction Based on Cash Flow Testing: CV TJ

The Directorate General of Taxation (DGT) holds the authority to perform tax corrections using indirect methods, such as cash flow and accounts receivable testing, pursuant to Article 13(2) of the KUP Law and SE-65/PJ/2013. This dispute centers on whether incoming cash flows in 2019 bank statements represent settlements of receivables from 2018 transactions reported under the accrual basis or undisclosed current turnover.

The Conflict of Opening Receivables and Balance Sheet Adjustments

The conflict arose when the Respondent identified cash inflows in CV TJ’s Mandiri Bank account that were not recorded as opening receivables in the 2019 Balance Sheet. The Respondent concluded these funds were taxable deliveries in December 2019. Conversely, CV TJ argued the funds were payments for 2018 sales, consistent with the accrual principle in Article 28(5) of the KUP Law. Notably, CV TJ only updated its 2018 receivables balance through an amended Tax Return (SPT) filed during the audit process.

Legal Consideration and Evidentiary Discrepancies

The Board of Judges emphasized that while the Indonesian VAT system follows the accrual principle, any claim regarding past transactions must be supported by competent evidence. During the hearing, CV TJ failed to produce source documents such as Tax Invoices, Invoices, or Delivery Orders issued in 2018 for the seven disputed transactions. The discrepancy between the claimed receivable values and the actual bank entry amounts led the Board to conclude there was no strong evidence that these sales had been previously reported.

Implications for Bookkeeping Discipline

The Board's decision to reject the appeal carries significant implications for Taxpayers regarding the necessity of disciplined bookkeeping. This ruling reinforces that theoretical arguments on accrual accounting are insufficient in Tax Court; they must be accompanied by a complete paper trail from the moment of delivery. Failure to present prior-year Tax Invoices will result in current cash inflows being treated as taxable VAT objects.