Import Duty Refunds for Sales of Motor Vehicles to Embassies

THIS summary of a civil review (peninjauan kembali/PK in Indonesian) decision covers a tax dispute concerning the customs authority's rejection of an application for refunds of import duty submitted by a taxpayer in connection with the sale of completely built-up (CBU) motor vehicles.

The customs authority asserted that the taxpayer was not entitled to a refund of import duty on the import of those CBU motor vehicles, on the grounds that CBU vehicles do not fall within the category of vehicles eligible for import duty exemption facilities.

On the other hand, the taxpayer argued that it was entitled to a refund of import duty on the imported motor vehicles, given that one of those vehicles was ultimately sold to a foreign mission in Indonesia that was entitled to exemption facilities under the principle of reciprocity.

At the appeal stage, the judicial panel of the Tax Court granted the taxpayer's appeal in full. At the civil review stage, the Supreme Court dismissed the application filed by the customs authority, thereby upholding the tax court decision.

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Chronology

The taxpayer filed an appeal to the tax court against its objection to the assessment issued by the customs authority. The judicial panel was of the opinion that the taxpayer, acting as the sole licensee agent (agen tunggal pemegang merek/ATPM in Indonesian), was entitled to a refund of import duty on the imports of CBU vehicles as provided for under the Minister of Finance Decree No. 90/2002.

With respect to that appeal, the judicial panel of the tax court decided to grant the taxpayer's appeal in its entirety. Subsequently, following the issuance of Tax Court Decision Number PUT. 61103/PP/M.IXA/19/2015 dated 28 April 2015, the customs authority filed a civil review application in writing to the registry of the tax court on 3 August 2015.

The subject matter of the dispute in this case is the customs authority's rejection of the application for refunds of import duty on the importation of motor vehicles as declared in Import Declaration (Pemberitahuan Impor Barang/PIB in Indonesian) No. 097293 on 30 March 2010, specifically in respect of 1 unit of a CBU vehicle valued at IDR318,214,105 that was sold to the Embassy of Thailand.

Opinions of the Disputing Parties

The civil review applicant objected to the legal reasoning of the judicial panel of the tax court, which held that the civil review respondent was entitled to a refund of import duty on the motor vehicles imported by the civil review respondent.

The civil review applicant was of the opinion that the application for refunds of import duty could not be granted. This is because, by reference to Circular Letter No. 28/1998, a refund of import duty on imported motor vehicles may only be granted to a sole licensee agent insofar as those vehicles are included in the list of goods accorded the import duty exemption facility.

Under Circular Letter No. 28/1998, the types of motor vehicle entitled to a refund of import duty are limited to sedans, sedan station wagons and domestically assembled jeeps (completely-knocked wodn/CKD) and not CBU vehicles imported by the civil review respondent.

Further, by reference to MoF Decree No. 90/KMK.04/2002, import duty exemption may only be granted on imports of goods belonging to a foreign mission and its officials, as a form of support in implementing diplomatic duties or functions under the principle of reciprocity.

Based on the legal facts and supporting documents submitted in the objection proceedings, it was established that at the time the CBU vehicles arrived in the Indonesian customs territory, the civil review respondent conducted the customs clearance process. That process was completed by settling the import duty and taxes on imports (pajak dalam rangka impor/PDRI in Indonesian), comprising VAT, sales tax on luxury goods (STLGs) and Article 22 Income Tax on the vehicles in question.

Following completion of the importation process, all of the vehicles were recorded as stock (inventory) belonging to the civil review respondent. Accordingly, the import was not carried out for the benefit of an embassy mission or international organisation, but rather to replenish the civil review respondent's inventory.

Based on the foregoing, it can be concluded that the correction performed by the civil review applicant was correct. In other words, the Tax Court Decision ought to have been set aside as it was inconsistent with the applicable provisions and the facts of the matter.

Conversely, the civil review respondent stated that it disagreed with the civil review applicant's position. The civil review respondent explained that it had imported CBU motor vehicles originating from Japan. In respect of those imported vehicles, import duty had been imposed and settled pursuant to the applicable customs provisions.

Subsequently, the vehicles that had been imported and subject to import duty were sold to the Embassy of Thailand. At the time of the transaction, the Embassy of Thailand held a PP8/PP19 document granting import duty exemption facilities on the purchase of those vehicles.

Accordingly, the import duty previously paid by the civil review respondent at the time of import was not included in the selling price of the vehicles. Pursuant to the applicable provisions, a refund of that import duty could then be applied for from the civil review applicant.

Supreme Court Considerations

The Supreme Court was of the opinion that the grounds of the civil review application could not be justified. The tax court decision, which granted the appeal in its entirety such that the civil review respondent was entitled to a refund of import duty in the amount of IDR318,214,105, was correct and proper. The Supreme Court's two legal considerations are as follows.

First, having examined and re-assessed the arguments submitted, the Supreme Court was of the opinion that those arguments were unable to override the facts or undermine the evidence that emerged during the trial, nor the legal reasoning of the judicial panel of the tax court.

Second, in the a quo case, the Supreme Court was of the opinion that the civil review respondent was entitled to a refund of import duty on the importation of 1 unit of a CBU vehicle declared in the Import Declaration No. 097293 on 30 March 2010.

Accordingly, the correction maintained by the civil review applicant was deemed inconsistent with the applicable provisions stipulated under Article 25 paragraph (1) subparagraph a in conjunction with Article 27 paragraph (1) subparagraph b of the Customs Law in conjunction with Article 2 of Government Regulation No. 8 of 1957 in conjunction with the Vienna Convention.

Based on the foregoing considerations, the civil review application filed by the civil review applicant was deemed to be without merit and must therefore be dismissed. Consequently, the civil review applicant was declared the losing party and ordered to pay the case fees. (dik/*this summary article was prepared by Fiscal Outreach Specialist, Yana Yosiyana)