A foreign-owned company disputing an Indonesian tax assessment generally begins by filing an objection with the Directorate General of Taxes (DGT). If the objection decision remains unfavorable, the taxpayer can appeal to the Tax Court.
How Does Indonesia’s Tax Dispute Process Work?
The taxpayer must state the amount of tax it believes is payable and explain the basis for disputing the assessment.
The DGT generally has 12 months to issue its objection decision. If no decision is issued within that period, the objection is deemed granted. If the objection is rejected in whole or in part, the taxpayer can appeal the decision to the Tax Court.
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What Evidence Is Needed During an Objection?
The taxpayer must support its objection with evidence relevant to the disputed adjustment. The required records depend on the issue: an expense deduction may require contracts, invoices, payment records, and evidence that the service was actually provided, while a transfer pricing adjustment may also require documentation supporting the pricing methodology and related-party transaction.
What Changes When the Dispute Reaches the Tax Court?
An appeal must generally be filed within three months from receipt of the objection decision.
The Tax Court examines the disputed assessment, the taxpayer’s arguments, the DGT’s position, and the supporting evidence. An ordinary appeal is generally required to be decided within 12 months from receipt, although the period can be extended by up to three months in certain circumstances.
How Much Tax Must Be Paid While the Dispute Is Pending?
The taxpayer generally must pay the amount it agreed to during the audit or verification closing conference before submitting an objection. Payment of the remaining disputed amount can generally be deferred while the objection is pending and, if the taxpayer subsequently appeals, until the Tax Court issues its decision.
A Typical Foreign-Investor Dispute Scenario
Consider a foreign-owned trading company whose VAT input credits are rejected during a tax audit, resulting in an assessment of IDR 10 billion (USD 600,000).
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During the audit closing conference, the company agrees with IDR 1 billion (USD 60,000) of the adjustment but disputes the remaining IDR 9 billion (USD 540,000). Before filing an objection, it generally must pay the IDR 1 billion it agreed to.
The company challenges the remaining adjustment using its VAT invoices, transaction records, payment evidence, and supporting documentation. If the DGT rejects the objection, the company can appeal the objection decision to the Tax Court.
Manage a Tax Dispute with MAP Resources Indonesia
MAP Resources Indonesia supports foreign-owned companies by preparing objection submissions as litigation-ready cases, aligning tax and accounting evidence from the outset, and helping protect cash flow throughout the dispute lifecycle. Contact us today at info@mapresourcesindonesia.com.
