Supreme Court Rejects DPP PPh 23 Correction on Forward Difference

The corporate taxpayer appealed the tax authority’s positive correction of the DPP for PPh Article 23 issued on 3 September 2014. The correction covered the forward‑exchange rate difference cost of Rp1,231,220,430 for the March 2009 tax period. The Tax Court partially upheld the appeal, and the Supreme Court rejected the tax authority’s review petition.

The rate difference arises from a forward contract, a derivative agreement to buy or sell foreign currency at a pre‑agreed rate on a future date. The tax authority argued that the cost is subject to PPh 23 withholding, while the taxpayer contended that such gains are not taxable under that article. The Supreme Court held that the authority’s evidence did not satisfy Article 26A paragraph 4 of the Tax Procedures Law, so the correction could not be maintained.

The ruling clarifies that forward exchange rate differences are not objects of PPh 23, providing certainty for companies engaged in derivative transactions. It also underscores the requirement that supporting documents be submitted during the audit phase to be admissible as evidence. Consequently, tax authorities must adjust similar assessments in future cases.