Unraveling the Polemic of Kenaf Purchases: Questionable PPh 22 Collection

The difference in viewing the transaction structure became the starting point of the dispute between PT GAN and the DJP (Directorate General of Taxes) regarding Income Tax Article 22 (PPh Pasal 22) for the December 2018 Tax Period. The DJP argued that the involvement of farmer groups in the kenaf fiber purchasing process indicated that the transaction was conducted through a collecting merchant (pedagang pengumpul). From this perspective, the entire purchase was treated as an object of PPh Pasal 22, resulting in a tax base (DPP) of Rp536.800.045,00 and a payable PPh of Rp2.684.000,00. PT GAN disagreed, arguing that the correction failed to consider the factual manner in which the transaction took place.

According to PT GAN, payment was made directly to the farmers, not to the groups functioning as collectors. They asserted that no single farmer ever received payment exceeding Rp20.000.000,00, thus not meeting the criteria for being subject to PPh Pasal 22. The large figure visible in the bookkeeping was attributed to the accumulated purchase value per group, which merely acted as a coordinator, not the single recipient of the payment. The company even provided details of purchases per farmer to demonstrate that individual transaction values remained below the threshold.

The Panel then found a crucial fact that became the turning point of the case: the DJP used figures from the Cost of Goods Sold (HPP) account (inventory usage) as the basis for the correction, not the actual purchase figures. This methodological error rendered the DJP's calculation inaccurate and excessively large. Therefore, the Panel conducted a review of all transaction documents, including the breakdown of purchases per farmer and per group. Both parties ultimately agreed that the total purchases in 2018 amounted to Rp6.817.861.175,00 but still differed on which transactions truly exceeded the Rp20.000.000,00 limit.

The results of the Panel's examination indicated that the majority of the DJP's correction lacked a proper tax base. However, the Panel also acknowledged the existence of a small number of transactions that indeed exceeded the threshold. From all the evidence reviewed, purchases worth Rp22.042.401,00 were proven to be above the limit and met the requirements to be an object of PPh Pasal 22. Thus, even though the DJP's calculation basis was flawed, the existence of a tax object remained legally valid.

Since only a small portion of the transactions met the provisions, the Panel canceled the DJP's correction of Rp514.757.644,00 and only upheld Rp22.042.401,00 as the correct Tax Base (DPP). From this figure, the payable PPh Pasal 22 is Rp110.000,00 plus a penalty interest of Rp48.048,00. The final decision partially granted the appeal, simultaneously affirming that the determination of PPh Pasal 22 must be based on the real purchase value, not group accumulation or irrelevant HPP figures.

Comprehensive Analysis and Full Tax Court Decision Available Here