The Hidden Tax Risks of Nominee Structures! Why Using Someone Else’s Name for Shares Could Cost You Dearly

Nominee Shareholding Dispute of BB: Validity of Net Wealth Correction versus Third-Party Asset Ownership Evidence

The ownership of shares under another person's name, or nominee shareholding, is the central dispute in this ruling, where the Director General of Taxes (DGT) applied a net income correction on additional share capital deemed as untaxed economic capacity. The primary focus of this dispute is the validation of asset ownership evidence between the Petitioner and a third party (spouse) within the framework of company law and prevailing Indonesian tax regulations.

The Core Conflict: Taxable Object of Net Wealth Increase by the DGT vs. Separation of Assets Evidence

The dispute arose when tax auditors discovered a significant increase in share capital in PT OI and PT LBB under the name of BB (the Petitioner). The DGT argued that according to Article 4, paragraph (1), point p of the Income Tax Law, any increase in net wealth derived from income that has not been taxed is a taxable object. Conversely, BB countered by claiming he was merely a nominee and that the funds actually belonged to his wife, N, under a prenuptial separation of assets agreement. BB invoked the "substance over form" principle, arguing the assets were not his.

Legal Considerations of the Board: Prohibitions in the Investment Law, Company Law, and Deficient Waarmerking

However, the Board of Judges held a different legal view. In its consideration, the Board emphasized that nominee practices are strictly prohibited by Article 33 of the Investment Law and Article 48 of the Company Law. Furthermore, the "Nominee Asset Ownership Statement" submitted by BB was deemed weak because it was only legally registered (waarmerking) in 2016, long after the 2014 tax year in dispute had ended. The absence of valid cash flow evidence from N to BB at the time of the transaction strengthened the DGT's position that the share addition was indeed BB's income.

Ruling Implications and Conclusion: Rejection of Appeal Due to Failure to Rebut Registered Beneficial Owner Presumption

The implication of this ruling reinforces that in wealth disputes, formal legalistic evidence (names listed in deeds and Tax Returns) plays a crucial role. Taxpayers cannot easily use "borrowed name" excuses to avoid taxes without synchronized and legally valid financial transaction evidence at the time of occurrence. This decision serves as a reminder to investors that the legality of asset ownership must align with tax reporting to avoid the risk of heavy official assessment corrections.

In conclusion, the appeal was rejected because the Petitioner failed to rebut the legal presumption that the registered shareholder is the actual beneficial owner. Formal compliance in legal documentation and the consistency of fund flows are the primary keys to winning disputes related to additional net wealth before the Tax Court.

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