Scrapped Assets Could Be Seen as Sales by Tax Authorities: Lessons from the PT NSBI Case.

PT NSBI Tax Dispute: Evaluation of Material Evidence on VAT Corrections from Internal Asset Write-Offs

The Director General of Taxes (DGT) issued a positive correction to the VAT Base (DPP) regarding self-collected VAT amounting to IDR 5.2 billion against PT NSBI. This correction was based on findings of Fixed Asset (FA) and Construction In Progress (CIP) write-offs in the company’s accounting records, which, in the tax auditor's view, were not supported by adequate disposal reports (Berita Acara). The DGT applied an economic substance approach, assuming that any asset removed from the balance sheet without evidence of destruction constitutes a supply of Taxable Goods (BKP) subject to VAT under Article 1A of the VAT Law.

The Petitioner's Argument: Direct Expense Reclassification and Absence of Cash Inflows

PT NSBI strongly refuted this assumption, explaining that the transactions were neither sales nor transfers to third parties. The company argued that for Fixed Assets, the write-off had occurred in a previous period (2018), while for CIP, the action was a reclassification into direct expenses because the assets' useful lives were found to be less than one year. The Petitioner emphasized that there were no cash inflows reflecting any sale or transfer that would constitute a VAT object.

Judicial Considerations: Board of Judges on Material Evidence and Transfer of Rights

The Board of Judges, in its legal consideration, cancelled the DGT’s correction. The Board ruled that the tax authority failed to provide concrete evidence of an actual supply of Taxable Goods to another party. The internal accounting write-off of an asset's book value does not automatically create a VAT object if it is not followed by a transfer of rights over the goods. The Board emphasized the importance of material evidence in tax procedural law, stating that fiscal assumptions must be supported by physical evidence or document flows showing a transfer.

Conclusion and Legal Implications: Strengthening Corporate Administration to Mitigate Fiscal Recharacterization

This decision provides legal certainty for Taxpayers that internal accounting policies such as asset write-offs cannot be categorized as a supply of Taxable Goods as long as there is no evidence of transfer of rights. However, this case serves as a reminder for corporations to strengthen document administration, such as Disposal Reports and asset reclassification documentation, to mitigate the risk of recharacterization by tax authorities in the future.

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