Winning a VAT Appeal: Why Accounts Receivable Flow Alone is Insufficient for Revenue Correction

VAT Base Correction and Accounts Receivable Dispute

This tax dispute originated from an audit conducted by the Directorate General of Taxes (DGT) on PT. FI for the October 2020 tax period. The primary focus of the dispute was the correction of the VAT Base (DPP) amounting to IDR 36,936,568,966.00. The Respondent (DGT) determined that there were unreported deliveries of goods or services based on an accounts receivable flow testing technique, which was subsequently extrapolated. These deliveries were considered VAT objects that should have been collected by the Taxpayer but were missing from the VAT Return.

The Core Conflict of Audit Methodology

The core of the conflict lies in the audit methodology employed. The Respondent insisted that a mathematical difference in the accounts receivable flow automatically reflects unreported deliveries. Conversely, the Petitioner strongly countered that the difference was merely a timing difference and technical errors in calculating the opening and closing receivable balances. The Petitioner emphasized that without physical evidence of goods flow or valid delivery documents, a correction based on extrapolation assumptions lacks a solid legal basis under the VAT principle of substance over form.

Legal Consideration by the Board of Judges

The Board of Judges, in its legal considerations, provided a resolution favoring legal certainty. The Judges argued that the burden of proof regarding the existence of a taxable object rests with the Respondent. Since the Respondent relied solely on accounts receivable flow analysis and extrapolation without providing concrete evidence such as goods flow (delivery documents, invoices, or unreported tax invoices), the correction was deemed unproven. The Judges concluded that a receivable discrepancy does not inherently prove the delivery of VAT objects during the tax period in question.

Ruling Implications and Material Evidence

The implications of this decision are significant for tax practice in Indonesia. This ruling reinforces that extrapolation techniques in VAT audits cannot stand alone without being supported by material evidence of the delivery of goods or services. For Taxpayers, this serves as a crucial lesson to consistently maintain reconciliation between financial reports (receivables) and operational documents (goods flow). In conclusion, the Board of Judges overturned the Respondent's entire correction, asserting that material truth must be based on actual delivery facts, not merely receivable calculation assumptions.

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