Tax Debt in Disapproved Tax Assessments and Sanctions for Rejection of Objections

In the dynamics of tax audits, differences of opinion often occur between the Taxpayer and the Tax Auditor regarding the amount of tax payable. These differences are then set forth in a Tax Assessment Notice (SKP). However, in a self-assessment system that upholds justice, the Law grants the Taxpayer the right to file a legal remedy of Objection.

Payment Obligation and Deferral of Tax Debt

Tax regulations distinguish the treatment between the tax amount agreed upon and not agreed upon by the Taxpayer at the time of the final discussion of audit results (Closing Conference).

Obligation to Pay Off Agreed Tax (Formal Requirement)

An absolute requirement for an objection to be processed is strictly regulated in Article 25 paragraph (3a) of the KUP Law. The Taxpayer must pay off the tax still to be paid at least in the amount that has been agreed upon in the final discussion before the objection letter is submitted. This provision is detailed in Article 10 paragraph (2) letter d of PMK 118 of 2024; if not met, the objection cannot be considered.

Status of Disapproved Tax (Deferred)

Regarding the tax amount not agreed upon (material of dispute), the law provides protection in the form of payment deferral. Based on Article 25 paragraph (7) of the KUP Law and Article 48 paragraph (1) of PP 50 of 2022, such amount is not a tax debt until the issuance of the Objection Decision Letter.

The legal implications of this rule are:

• No Initial Repayment Obligation: The disputed part is not required to be paid off at the time of filing.
• Collection Halted: Active collection actions (such as Distress Warrants) cannot be carried out while the objection process is ongoing.

Administrative Sanctions for Rejection of Objection

The payment deferral facility is balanced with the risk of fine sanctions to prevent groundless filings. If the objection is rejected or granted partially, the Taxpayer is subject to a fine of 30% (thirty percent) based on Article 25 paragraph (9) of the KUP Law.

Sanction Exception (Relation to Appeal)

In accordance with Article 25 paragraph (10) of the KUP Law, the 30% fine is not imposed if the Taxpayer submits an Appeal application to the Tax Court. However, the risk shifts to a 60% fine sanction if the appeal is later rejected.

[Image comparing tax objection and appeal sanctions in Indonesia]

Repayment Timeline Post Decision

The "deferred" status has a repayment time limit as follows:

• If Not Filing an Appeal: Repayment must be done no later than 1 (one) month from the date of issuance of the Objection Decree.
• If Filing an Appeal: The deferral is deferred again until 1 (one) month from the date of issuance of the Appeal Decision (Article 27 paragraph 5a of the KUP Law).

Implications of Objection Withdrawal (PMK 118 of 2024)

Based on Articles 55 - 59 of PMK 118 of 2024, withdrawal of an objection before the SPUH has serious legal consequences:

1. Becomes Retroactive Tax Debt: The tax that was previously deferred becomes a tax debt starting from the date of issuance of the initial SKP.
2. Collection Interest Sanctions: Because it is considered a debt since the initial SKP, collection interest sanctions (Article 19 of the KUP Law) will arise calculated retroactively from the due date of the original SKP.
3. Prohibition of Other Legal Remedies: The Taxpayer cannot resubmit an objection for the same SKP or request reduction/cancellation of an incorrect SKP (Article 36 of the KUP Law).

Therefore, Taxpayers must be careful: pay off the agreed tax as a formal requirement, and maturely calculate the risk of interest accumulation before deciding to withdraw an objection.

References:

1. Law Number 6 of 1983 (UU KUP) as lastly amended by Law Number 6 of 2023.
2. Government Regulation Number 50 of 2022 concerning Procedures for the Implementation of Rights and Fulfillment of Tax Obligations.
3. Minister of Finance Regulation Number 118 of 2024 concerning Procedures for Rectification, Objection, Reduction, Elimination, and Cancellation.