A tax dispute between a taxpayer and the DGT will typically arise following the issuance of a tax assessment letter
(SKP) by the DGT which the taxpayer disputes. An SKPKB, an SKPKBT, and an STP constitute legal tax collection instruments on the basis of which the DGT may issue a Distress Warrant if the taxpayer fails to settle the underpaid tax on time. The way the DGT executes the Distress Warrant may give rise to another tax dispute between the parties.
The ways available to resolve such tax disputes are as follows:
A taxpayer who does not agree with a tax assessment letter can submit an Objection (Keberatan) to the DGT within three months of the date of issue of the assessment letter. The Objection must state the amount the taxpayer has calculated as the tax due and set out the reasons for its disagreement with the DGT tax assessment.
The DGT has to issue a decision on the tax Objection within 12 months of the filing date of the Objection. If no decision is issued by the DGT within 12 months, the objection is automatically deemed approved by the DGT.
If the objection is rejected by the DGT, any underpayment is subject to a surcharge of 50%. However, the underpaid tax and the surcharge are not payable if the taxpayer files an appeal with the tax court in respect of the objection decision.
An Objection may also be filed by a taxpayer with the DGT office with respect to tax withheld by a third party. The same time limits on filing the Objection and for the DGT’s decision apply to this type of Objection.
A taxpayer who does not accept the DGT’s Objection decision can file an Appeal (Banding) with the Tax Court within three months of the receipt of the DGT Objection. To the extent that the DGT Objection Decision calls for a payment of tax due, according to the Tax Court Law, at least 50% of the tax due must be settled before filing the Appeal. As set out in the current Tax Administration Law, the taxpayer is only required to pay an amount agreed in the tax audit closing conference. This creates a mismatch, however currently the Tax Court generally follows the Tax Administration Law.
The Tax Court will typically have to decide on an Appeal within 12 months. Any underpaid tax resulting from the tax court decision is subject to a surcharge of 100%.
Other avenues for tax dispute resolution
The DGT, following a taxpayer’s Correction Request, or
by virtue of its official position (ex-officio), may correct or cancel a tax assessment letter, an STP, or their derivatives issued on the basis of those letters. The derivatives include, among others:
• Objection Decision Letters;
• Decision Letters on the Reduction or Cancellation of Administrative Sanctions;
• Decision Letters on the Reduction or Cancellation of Tax Assessment;
• Decision Letters on an Early Refund of Overpaid Tax.
The DGT must issue a decision on a Correction Request within six months of the date of filing. If no decision is issued by the DGT within six months, the Correction Request is automatically deemed to have been approved by the DGT.
Taxpayers who do not (fully) accept the DGT Decision
on a Correction Request can file a lawsuit (Gugatan) with the Tax Court within 30 days of the receipt of the DGT decision. A lawsuit against the DGT can also be filed with the Tax Court for the execution of Distress Warrant. In this case, the lawsuit must be filed no later than 14 days after the execution date.
The Tax Court must decide on a lawsuit within six months.