Substance Over Form Principle on Negative Vendor Confirmation: CSTS Joint Operation Input Tax Dispute

The dispute over Input Tax credit triggered by negative confirmation responses from the counterparty's Tax Office (KPP) remains a crucial issue in Indonesian tax litigation. In Case Number PUT-000986.16/2024/PP/M.XXA, Board of Judges XXA examined a dispute involving the correction of March 2022 Input Tax for CSTS Joint Operation (Appellant) amounting to IDR 110,505,247,560.00. This correction was imposed by the Respondent (DGT) solely because the confirmation response for Tax Invoices from PT BP (Counterparty) was stated as "Non-Existent," meaning the seller had not reported the VAT collection in their VAT Return.

The Core

The core of this conflict lies in the tension between formal certainty and material truth. The Respondent insisted that based on Director General of Taxes Decree Number KEP-754/PJ./2001, the right to credit does not arise if the tax has not been reported by the seller. Conversely, the Appellant presented legal arguments for the protection of a bona fide buyer. The Appellant emphasized that under Article 33 of the KUP Law, joint and several liability can only be imposed on the buyer if the buyer cannot provide evidence of tax payment to the seller. The Appellant proved the transaction's authenticity through robust evidence of money flow, invoices, and valid tax invoices.

In Its Resolution

In its resolution, the Board of Judges prioritized the principle of substance over form. After examining material evidence such as Bank Statements, Payment Vouchers, and Purchase Orders, the Board opined that the Appellant had fulfilled its VAT payment obligations to the seller. The Judges asserted that administrative non-compliance by the seller (PT BP) should not eliminate the buyer's constitutional right to credit Input Tax, provided that the money flow evidence is strongly validated in court.

The Implication

The implication of this ruling provides legal certainty for Taxpayers that as long as transaction documentation and proof of payment (money flow) are properly maintained, the risk of correction due to a counterparty's negligence can be mitigated at the appeal level. This decision strengthens the jurisprudence that joint and several liability is not automatic but depends on the buyer's ability to materially prove tax payment. In conclusion, the court continues to regard material evidence as the highest standard in deciding VAT credit disputes.