Tax Free Billions! How BDSA Won the Article 15 Income Tax Dispute After Business License Revocation

PE Decathlon S.A. Tax Dispute: How License Revocation Invalidates Article 15 Tax Assumptions

The revocation of business licenses by BKPM became a crucial point that annulled the Article 15 Income Tax correction worth IDR 11.48 billion against BDSA. This dispute centered on the entity's classification—whether BDSA acted as a Foreign Trade Representative Office (KPDA), which has tax objects on gross export value, or merely a Foreign Company Representative Office (KPPA) of a non-commercial nature. The Respondent made corrections by assuming that BDSA was still actively performing quality control and shipment monitoring functions for the Decathlon group in September 2022, thus deemed to meet the special calculation norm criteria based on KMK-634/KMK.04/1994.

Trial Facts: Legal and Factual Cessation of Operations

However, the trial facts revealed that BDSA had legally and factually ceased operations since June 14, 2022, as evidenced by the business license revocation letter from BKPM. The Applicant successfully proved that there were no employee activities, salary payments, or involvement in import transactions between DPL (Singapore) and PT DSI during the disputed tax period. The absence of substantial functions and the revoked legal status invalidated the Respondent's assumptions regarding business activities providing added value in Indonesia.

Judicial Rationale: The Requirement of Real Business Activity

The Board of Judges provided a legal consideration that the imposition of Article 15 Income Tax requires evidence of business activities that generate compensation. Since BDSA was proven to no longer have a license and performed no activities in September 2022, there was no tax object to be imposed. This decision reinforces that the validity of operational licenses and evidence of factual inactivity are strong legal defenses against tax corrections based on assumptions of Permanent Establishment functions.