Analyzing General Anti-Avoidance Rule (GAAR) Policy in Indonesia

Abstract

The General Anti-Avoidance Rule (GAAR) provision, rooted in the
substance over form principle, has been codified in the HPP Law
and Government Regulation No. 55/2022. Much of the prior
research on GAAR was conducted before the enactment of these
regulations. To address this gap, the present study aims to assess
the legal certainty of Indonesia's GAAR as it pertains to the
substance over form principle and offers recommendations for
improving the law in this area. This study adopts a qualitative
research methodology, utilizing a case study approach that
includes a review of relevant literature and interviews with
regulators and stakeholders. The findings reveal that the GAAR
provision outlines three specific conditions under which it can be
applied. However, the provision does not explicitly state that
obtaining a tax benefit must be the primary purpose of the
transaction, leaving some ambiguity. To enhance the clarity and
effectiveness of the GAAR, the implementing guidelines should
emphasize this clause and provide clear definitions for
"transaction," "tax benefit," and the "purpose test." Whether these
terms are interpreted broadly or narrowly should align with the
intended scope of Indonesia's GAAR.