Tax Invoice "Not Found" in DGT System? How Taxpayers Can Win VAT Disputes

Input Tax Credit Disputes and System Failures

Failures in the tax administration system to record tax invoice reporting by counter-parties often serve as the basis for the Directorate General of Taxes (DGT) to unilaterally correct Input Tax credits. Pursuant to Article 9, paragraph (8), letter f of the VAT Law, the crediting of Input Tax must meet both formal and material requirements; however, a seller's non-compliance in filing VAT returns is frequently deemed a material failure for the buyer. In the case of PT FI, the Respondent issued a correction because the tax invoice confirmation response was stated as "Non-Existent," indicating that the supplier had not correctly reported their tax obligations within the tax information system.

The Core Conflict and Joint Liability

The core of the conflict in this dispute lies in the debate over who should bear the burden of tax reporting non-compliance. The Respondent insisted that without reporting from the seller, there is no evidence that VAT was remitted to the state treasury, thus forfeiting the buyer's right to credit the tax. Conversely, the Taxpayer (WP) argued that they are a good-faith buyer who has settled all VAT payment obligations to the supplier. The Taxpayer emphasized the application of the joint and several liability principle according to Article 33 of the KUP Law and Article 4 of Government Regulation No. 1 of 2012, which states that a buyer is only jointly liable if they cannot provide evidence that the tax has been paid.

Legal Consideration by the Tax Court Judges

The Tax Court Judges, in their legal consideration, emphasized that material truth transcends administrative confirmation obstacles. The Panel opined that as long as the Taxpayer can prove the existence of actual flow of goods and flow of funds, the right to credit Input Tax remains protected. The results of the evidentiary trial showed that PT FI had made valid payments via bank transfers. Consequently, the Panel of Judges decided to cancel all of the Respondent's corrections, as the seller's error or negligence in reporting invoices should not disadvantage a buyer who has fulfilled their obligations.

Ruling Implications and Practical Practice

This decision carries significant implications for tax practice in Indonesia, particularly in strengthening legal certainty for Taxpayers facing invoice confirmation issues. It serves as a precedent that documentation of fund flows (proof of payment) and goods flows are the most crucial evidentiary instruments in refuting automatic correction assumptions resulting from "Non-Existent" confirmation responses. For other Taxpayers, this case is a reminder to always comprehensively document transaction evidence to avoid the risk of double tax burdens due to counter-party non-compliance.

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