The principles of Burden of Proof and Audit Authority are fundamental pillars in Indonesian tax disputes, particularly concerning Income Tax Article 23 (PPh Article 23). The Tax Court Decision Number PUT-005810.12/2022/PP/M.XVB Tahun 2025, which fully granted the appeal filed by PT RMI (formerly PT SDMI), provides a significant legal affirmation that equalization discrepancies between Profit/Loss expenses and PPh Article 23 objects cannot automatically serve as the sole legal basis for issuing a Deficiency Tax Assessment Letter (SKPKB).

Core Conflict: Equalization Versus Transaction Substance

The conflict originated from a correction made by the Respondent (Directorate General of Taxes) on the PPh Article 23 Tax Base (DPP) for the March 2019 Tax Period, amounting to IDR 6,898,580,700.00. This correction was based purely on the equalization method: a comparison between the total expenses with potential PPh Article 23 objects recorded in the books (Profit/Loss) and the total PPh Article 23 objects reported by the Taxpayer in the PPh Article 23 Periodic Tax Return (SPT Masa). The resulting discrepancy was deemed to be income that had not been subject to tax withholding.

The Taxpayer (Appellant) refuted the correction with the key argument that the equalization discrepancy arose from expenses that did not constitute objects of PPh Article 23 withholding (e.g., transactions with individual Taxpayers, Final PPh, or asset purchases). The Appellant asserted that they had correctly withheld, paid, and reported PPh Article 23 for all transactions where it was genuinely due.

Resolution: The Legal Opinion of the Panel of Judges

The Tax Court Panel of Judges concluded that while the equalization technique is a valid audit tool, its result only provides an indication of potential tax deficiency. Based on Article 29 Paragraph (2) of the Law on General Provisions and Tax Procedures (UU KUP), to substantiate this indicative correction, the burden of proof lies with the Respondent. The Respondent was obliged to conduct further investigation and present sufficient and competent evidence, such as contracts, invoices, and service reports, proving that the IDR 6.8 billion discrepancy was substantively an object of PPh Article 23 (rent, management services, etc.) that was due in the March 2019 Tax Period.

Since the Respondent failed to present such substantive evidence during the court proceedings, the Panel of Judges concluded that the PPh Article 23 DPP correction lacked adequate basis. The Judges granted the Taxpayer's appeal in its entirety, setting the amount of PPh Article 23 still due at Zero.

Analysis and Impact: Implications of the Decision

This decision carries crucial legal implications. It sends a strong signal to Tax Auditors that corrections based solely on equalization results and assumptions cannot be sustained in court if the Taxpayer provides a logical explanation and the Respondent fails to meet its burden of proof standard. For Taxpayers, this decision highlights the critical importance of preparing comprehensive internal equalization working papers, meticulously documenting every un-equalized item, and maintaining detailed archives of transaction evidence. This documentary readiness is the key to successfully contesting corrections based on mere indications.

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