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The Tax Court is regulated under Law Number 14 of 2002 concerning the Tax Court (Law No. 14/2002 / “ Tax Court Law ”). According to Article 2 of the Tax Court Law, the Tax Court is a court with the authority to hear and decide on cases filed by taxpayers who seek justice over tax disputes. Tax Court Law defines tax disputes as disputes on taxation between taxpayers vis a vis the official in charge as a result of an appealable order or claim against the tax court under applicable regulations, including claims against tax collection conducted by forced warrant.

Upon the definitions above, most tax disputes are under the jurisdiction of the Tax Court, except for tax crimes. Means of Alternative Dispute Resolution ( “ADR” ), such as arbitration and mediation, are not used in tax disputes between taxpayers and tax authorities

In the Indonesian context, tax disputes involve the administration of local governments under the regency, provincial and central revenue authorities. Central government taxes are administered by the Ministry of Finance, specifically by the Directorate General of Taxes ( “DGT ”/ Direktorat Jenderal Pajak ). Procedures for dispute resolution are governed by  Law No. 28 of 2009 concerning Local Taxes at local administrative levels; and by the General Rules of Taxation Law (GRT Law/ Peraturan Umum Hukum Perpajakan ) for taxes administered by the DGT.

This Article aims to overview the tax litigation and tax court system in Indonesia.


Tax Litigation

Under Indonesian Law, the following are the conditions for a dispute to be brought to the Tax Court:

1. During a tax audit

Tax Audit is an activity carried out by a tax auditor to assess Taxpayers’ compliance. Based on Article 29 of Law Number 16 of 2009 concerning General Tax Provisions ( Ketentuan Umum Perpajakan/ KUP ”), the DGT has the authority to perform tax audits. There are two primary purposes of a tax audit, which are not limited to:

  1. test taxpayers’ compliance;
  2. other purposes concerning tax law enforcement;

However, to provide legal certainty for taxpayers, Article 13 KUP stipulates that tax audits should be carried out within the statutory limitation of 5 years after the date of a tax becomes payable or after the end of a tax period, a fraction of a fiscal year, or a fiscal year. To ensure that tax audits comply with Article 29, the Minister of Finance has issued several regulations such as 17/PMK.03/2013 (“ PMK-17 ”) as amended with 184/PMK.03/2015 concerning Tax Audit Procedures.  PMK-17 and its amendment are the legal basis for the tax audit process.

During a tax audit, disputes may arise. For example, during a tax assessment, the DGT finds that the tax disclosed in the tax return is incorrect. In this instance, according to Article 12, Paragraph 3 of the GRT Law, the DGT issues a tax assessment letter. In the Taxpayer’s defense, they merely do not maintain proper accounts and records. The DGT can issue a tax assessment letter with an underpaid amount and add a 50% penalty in case of income tax and a 100% penalty in case of withholding tax, value-added tax/VAT and sales tax of luxury goods. Regarding the DGT tax assessment letter and withholding tax receipt, Taxpayers can request administrative remedies as provided in Article 25 of the GRT Law by filing an objection to the DGT within three months from the date the tax assessment letter or the withholding tax receipt is sent.

2. During an objection process

Taxpayers may file a tax objection against any tax assessments through the Tax Court within three months after the date the Tax Court sends the tax assessment letter to the Taxpayers. Before submitting the objection letter, the Taxpayers must pay at least the amount of tax payable as determined by the DGT. If the objection is rejected or accepted in part by the DGT, unless the Taxpayers file for a tax appeal, they will be subject to administrative sanctions. In case the DGT fails to issue an objection decision letter within 12 months of receipt of the objection letter, the Taxpayer’s objection will be granted.

3. Tax appeal

Taxpayers can appeal to the Tax Court against the DGT’s decision on the Taxpayer’s objection within three months after the receipt of the DGT’s decision. The Taxpayers are required by the Tax Court Law to pay at least 50% of the tax payable before filing an appeal. The Tax Court will conduct hearings on the appeal and must conclude within twelve months after the appeal is filed. If the appeal is rejected by the Tax Court, the Taxpayers must pay the unpaid tax in the tax assessment plus a 100% penalty of the tax assessment unpaid at the time the objection is filed.


Tax Court System

tax court system adco law

The Tax Court is part of the administrative court system under the judicial power of the Supreme Court. According to Article 5 paragraph (1) and (2) of Tax Court Law, in developing its judiciary techniques, the Tax Court is managed by the Supreme Court, while the Ministry of Finance has the authority to develop its organization, administration, and finance of the Tax Court.

Based on Article 81 of the Tax Court Law, the Tax Court is required to issue a decision on an appeal within 15 months (12 months plus a three-month extension) and on a lawsuit within nine months (six months plus a three-month extension).

At the first degree court, Taxpayers are not required to pay unpaid taxes as a procedural requirement, while in an appeal, Taxpayers must pay at least 50% of the unpaid taxes. If the appeal is filed by the DGT, the unpaid taxes in dispute are not required to be paid because the unpaid taxes are deemed postponed until one month after the Tax Court decision is made. Before the verdict for the appeal, the Taxpayers are only required to pay the amount of unpaid taxes agreed during the tax audit.

If the Tax Court decision is considered unfavorable to either the taxpayer or the DGT, both parties are entitled to request a civil review application ( peninjauan kembali ) to the Supreme Court. The following are the grounds for the application:

  1. if the Tax Court’s decision is made based on deception by the counterparty, which is only known after the case is decided, or if the Tax Court’s decision is made based on inauthentic evidence, which is adjudicated by a civil court;
  2. if there is new written evidence that is decisive, which is known during the court proceedings and will result in a different decision;
  3. if there is an  ultra petita decision;
  4. if part of the requisition has been decided without consideration; and
  5. if the Tax Court’s decision has violated the applicable laws.


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By combining commercial sensibilities and legal expertise, ADCO as a Law Firm Jakarta  assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.

Dendi Adisuryo

Liza Mashita

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This publication has been prepared for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.