The VAT dispute between PT UBS (formerly PT KGS) and the Directorate General of Taxes (DGT) serves as a significant precedent regarding the supremacy of material truth over formal tax administration procedures. The core conflict began when the tax authority corrected Input Tax for the April 2018 Tax Period on the grounds that the confirmation or clarification of VAT invoices from the seller's Tax Office returned a "None" response. Based on KEP-754/PJ./2001, the DGT insisted that the Input Tax could not be credited because it was not verified in the counterparty's system.
However, PT UBS filed a strong rebuttal by emphasizing the economic substance of the acquisition of Taxable Goods (BKP). During the trial, the Petitioner successfully presented irrefutable evidence in the form of bank transfer slips covering both the Tax Base (DPP) and VAT to the counterparty. This proved that the Petitioner had fulfilled its obligation to pay taxes to the collecting party, and thus the application of the joint and several liability principle as regulated in Article 33 of the KUP Law should not disadvantage a good-faith buyer.
The Board of Judges, in its legal considerations, provided a resolution that sided with justice for the Taxpayer. The judges emphasized that the non-compliance or negligence of the counterparty in reporting VAT in their Tax Returns should not be burdened upon the buyer, as long as the buyer can prove the actual occurrence of the transaction through the flow of goods and flow of funds tests. This decision has major implications as it affirms that as long as the proof of payment and receipt of goods is valid, the right to credit Input Tax must be granted despite administrative obstacles in the tax authority's internal system or third-party negligence. In conclusion, material truth is the primary commander in deciding tax credit disputes in the Tax Court.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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