Understand the Meaning and Scope of Tax Objections

In the Indonesian tax system which adheres to self-assessment, Taxpayers are given full trust to calculate, compute, pay, and report the tax payable themselves. However, in the context of compliance supervision, the Directorate General of Taxes (DJP) has the authority to conduct tax audits. The results of these audits often lead to the issuance of a Tax Assessment Notice (SKP) which may differ from the Taxpayer's calculations.

If the Taxpayer feels dissatisfied or disagrees with the material or tax value determined by the tax auditor in the SKP, Indonesian tax law provides an administrative dispute resolution path called Tax Objection. Understanding this mechanism is crucial so that the Taxpayer's rights remain protected.

Definition of Tax Objection

Tax Objection is a legal remedy that can be taken by a Taxpayer who feels dissatisfied or disagrees with a tax assessment issued by the Directorate General of Taxes, or regarding tax withholding/collection by a third party.

In a juridical definition, an objection is the right of a Taxpayer to request a review of a tax assessment notice or tax withholding/collection to the Director General of Taxes. This process is the first stage in resolving domestic tax disputes before moving to the Appeal stage at the Tax Court.

In filing an objection, the Taxpayer may only file an objection regarding the material or content of the tax assessment notice, which covers the amount of loss according to the provisions of tax laws and regulations, and/or the amount of tax.

Scope of Objection

Not all letters issued by the DJP can be objected to. Based on the KUP Law and PMK Number 118 of 2024, the scope of objections is specifically limited. Taxpayers may only submit an objection to the Director General of Taxes regarding a:

1. Notice of Tax Underpayment Assessment (SKPKB)

A Tax Assessment Notice that determines the amount of tax principal, amount of tax credit, amount of underpayment of tax principal, amount of administrative sanctions, and amount of tax still to be paid.

2. Notice of Additional Tax Underpayment Assessment (SKPKBT)

A Tax Assessment Notice that determines an addition to the amount of tax that has been previously assessed.

3. Notice of Nil Tax Assessment (SKPN)

A Tax Assessment Notice that determines the amount of tax principal is the same as the amount of tax credit or no tax is payable and there is no tax credit.

4. Notice of Tax Overpayment Assessment (SKPLB)

A Tax Assessment Notice that determines the amount of tax overpayment because the amount of tax credit is greater than the tax payable or should not be payable.

5. Tax Withholding or Collection by a Third Party

Objections filed regarding withholding or collection actions carried out by third parties based on tax law provisions (for example, withholding evidence of Income Tax Article 21 or Income Tax Article 23).

In addition, objections also cover the Notice of Tax Payable (SPPT) and Tax Assessment Notice for Land and Building Tax (SKP PBB) in the context of PBB. It is important to note that one objection letter may only be filed for one tax assessment notice or one proof of withholding/collection.

Formal Requirements for Filing an Objection

In order for an objection request to be processed and considered by the DJP, the Taxpayer is required to fulfill the formal requirements that have been strictly determined. The following are the details of the formal requirements for filing an objection:

1. The objection letter must be compiled in writing using the Indonesian Language. The Taxpayer must state the amount of tax payable/withheld or the amount of loss according to their own calculation, accompanied by clear reasons.
2. Filed within a period of 3 (three) months from the date the SKP is sent, the date of withholding by a third party, or the date the SPPT/SKP PBB is received. Unless due to circumstances beyond control (force majeure).
3. Must pay off the tax still to be paid at least in the amount agreed upon by the Taxpayer in the final discussion of audit results (Closing Conference), before the objection letter is submitted.
4. Signed by the individual Taxpayer or the Taxpayer's representative (management for Corporate bodies). If authorized to another party, must attach a Special Power of Attorney.
5. The Taxpayer may not submit an application under Article 36 of the KUP Law (reduction of sanctions/cancellation of assessment) for the same SKP simultaneously.

Objection Decision Timeline

The Director General of Taxes must resolve and provide a decision on the objection filed within a maximum period of 12 (twelve) months from the date the objection letter is received in full.

If the 12-month period is exceeded and the DJP has not issued a decision, then the Taxpayer's objection is deemed granted. The DJP is required to issue an Objection Decision Letter in accordance with the Taxpayer's submission within a maximum of 1 month thereafter.

The decision issued may be in the form of:

• Granting entirely;
• Granting partially;
• Rejecting; or
• Increasing the amount of tax still to be paid.

If the objection is rejected or granted partially, the Taxpayer is subject to an administrative sanction in the form of a fine of 30%. This sanction is not imposed if the Taxpayer continues with the Appeal legal remedy to the Tax Court.

Comprehensively understanding the objection procedure is the key for Taxpayers to defend their rights. With high precision in fulfilling formal requirements, Taxpayers can ensure their tax disputes are processed fairly and within the legal corridor.

References:

1. Law Number 6 of 1983 concerning General Provisions and Tax Procedures as has been amended several times, most recently by Law Number 6 of 2023 (UU KUP).
2. Minister of Finance Regulation Number 118 of 2024 concerning Procedures for Rectification, Objection, Reduction, Elimination, and Cancellation in the Field of Taxation.