Mechanism for Settlement of Objections by the Directorate General of Taxes

In the Indonesian tax system, disputes between Taxpayers and the tax authorities (fiskus/Directorate General of Taxes/DJP) often originate from the issuance of a Tax Assessment Notice (SKP) resulting from an audit where the value or material is not agreed upon by the Taxpayer. As a form of protection for Taxpayer rights, the Law provides room to file an administrative legal remedy called an Objection.

Initial Stage: Reception and Formal Research

The objection settlement process begins when the objection letter is received by the DJP. In accordance with Minister of Finance Regulation Number 118 of 2024, the Taxpayer files an objection in writing in the Indonesian language by stating the amount of tax payable or amount of loss according to the Taxpayer's calculation accompanied by clear reasons.

Verification of Formal Requirements

Before entering the substance of the dispute, the Objection Research Implementation Unit will conduct strict formal research. Based on SE-11/PJ/2014, the Objection Research Team must ensure:

• One letter for one assessment: One objection submission may only be for one SKP or one proof of withholding/collection.
• Time Limit: The letter is submitted within a period of 3 (three) months from the date the SKP is sent or the date of withholding/collection.
• Tax Settlement: The Taxpayer must have paid off the tax still to be paid at least in the amount agreed upon in the Closing Conference.

If these formal requirements are not met, the letter is not an objection letter so it cannot be considered.

Material Research Stage: Authority and Procedure

After the formal requirements are met, the DJP has 12 (twelve) months to resolve the objection. Within this period, the Objection Research Team works to test the material truth of the dispute.

1. Dispute Analysis and Matrix

The first technical step taken by the Research Team is to compile an Objection Dispute Matrix. This document maps the examiner's corrections, the examiner's reasons, the Taxpayer's objection reasons, and the Research Team's initial opinion.

2. Document Borrowing and Request for Information

The Research Team is authorized to borrow books, records, data, and information. The Taxpayer is required to lend the requested documents no later than 15 (fifteen) working days after the request letter is sent.

3. Request for Third Party Information

If the dispute requires external confirmation (e.g., banks or suppliers), the Research Team is authorized to request evidence from third parties to ensure validity objectively.

Objection Discussion Mechanism (Quality Assurance)

This is an internal DJP quality control layer to ensure objection decisions are made objectively and accountably, especially for large-value or strategic cases.

1. Mandatory Discussion Criteria

Discussion is mandatory if the submission meets the criteria:

• Disputes related to Transfer Pricing and/or Tax Treaties (P3B).
• Large-value SKP: >Rp 75B (Large Taxpayer), >Rp 50B (Jakarta Special), >Rp 25B (Jakarta), or >Rp 10B (Outside Jakarta).

2. Discussion Technicalities

The results of the discussion are set forth in the Minutes of Discussion Meeting which become the main consideration material for the final decision.

Final Discussion: Notification Letter to Attend (SPUH)

Before issuing a decision, the DJP is required to request the Taxpayer to present themselves via SPUH, attached with the List of Objection Research Results.

Taxpayer Rights:

• Responses must be submitted no later than 10 (ten) working days after SPUH is sent.
• The Taxpayer may provide final clarifications or refute findings in the meeting.

Objection Decision

The DJP has four decision options:

Warning: If rejected or granted partially, the Taxpayer is subject to a fine of 30%. This is not imposed if an Appeal is filed.

References:

1. Law Number 6 of 1983 (UU KUP) as last amended by Law Number 6 of 2023.
2. Government Regulation Number 50 of 2022.
3. Minister of Finance Regulation Number 118 of 2024.
4. KMK No. 328/KMK.03/2011 & KEP-336/PJ/2011.
5. Circular of the Director General of Taxes No. SE-11/PJ/2014.