The Application of Deemed Interest on Intercompany Receivables and Credit Card Tips: PT TR Tax Dispute

The Directorate General of Taxes frequently applies Article 18 Paragraph (3) of the Income Tax Law to tax intercompany receivables within a group as deemed interest. In the case of PT TR, the Respondent made a positive adjustment on interest income amounting to IDR 933 million and credit card tips of IDR 2.08 billion, considered as additional economic capability for the company. The Respondent argued that receivables to affiliates must be charged with an arm's length interest rate, and tips paid by consumers via credit cards constitute company income.

However PT TR Provided a Strong Rebuttal Regarding Temporary Bridging Funds and Staff Transfers

However, PT TR provided a strong rebuttal, arguing that the receivables were temporary bridging funds (reimbursements) without interest, similar to transactions with non-affiliated suppliers. Regarding tips, the Petitioner emphasized that these funds are the rights of the staff, merely "passing through" the company's payment system and never recorded as either an expense or income. The Board of Judges agreed with the Petitioner, stating that the application of Article 18 Paragraph (3) was inappropriate since both parties are domestic taxpayers with the same tax rate, indicating no motive for tax avoidance. Regarding tips, evidence of transfers to staff bank accounts became the key factor in overturning the Respondent's adjustment.

This Decision Confirms That Generalizing Profit-Shifting Intent Requires Court Proceeding Accountability

This decision confirms that not all affiliated receivables can be generalized as interest objects without evidence of profit-shifting intent. Furthermore, the accountability of entrusted fund flows (such as tips) is crucial in court proceedings to prevent income reclassification by tax authorities.