Imposition of Income Tax on Severance Pay: Dispute Analysis and Legal Interpretation in Tax Court Decisions

Abstract

Termination of Employment (PHK) not only has consequences for employment but also for taxation, particularly regarding the imposition of Income Tax (PPh) on severance pay. In practice, the imposition of PPh on severance pay often gives rise to disputes between taxpayers and tax authorities due to differing interpretations of applicable legal provisions. This study aims to analyze the typology of PPh disputes on severance pay and the patterns of legal interpretation in Tax Court decisions. The research method used is normative legal research with statutory, case, and conceptual approaches. The results indicate that disputes are dominated by three main issues: determining the time of tax liability, the tax base, and the classification of payment components. Tax Courts tend to use a substantive approach (substance over form) in interpreting tax provisions. This study emphasizes the importance of norm reformulation to increase legal certainty, fairness, and utility in the tax system.