Tax law disputes over the arm’s length principle in affiliated share transfers

Read full text
Authors: Bembo Syah Sutan Irham Agung, Siti Nuryanah
Cited by: 1
References: 48

Abstract

Affiliated share transfer transactions pose significant challenges in corporate law and governance, particularly when they trigger tax disputes over compliance with the arm’s length principle [ALP] (Mwape et al., 2025). Such disputes undermine legal certainty, shareholder protection, and effective corporate governance (Barikova, 2024). This study aims to analyze the underlying causes of tax disputes arising from the application of the arm’s length principle in affiliated share transfers and to assess their governance implications. Using Indonesia as a case study, the research adopts a qualitative descriptive methodology based on document analysis of Tax Court decisions from 2020 to 2024, and in-depth interviews with tax officers and tax consultants. A fishbone model is employed to identify the root causes of disputes. The findings reveal that tax disputes are primarily driven by complex cross-ownership structures, cross-border affiliations, inadequate transaction documentation, and differing legal interpretations of fair value in ownership transfers. The study concludes that these disputes reflect broader governance weaknesses and principal–agent problems in related party transactions. This study is relevant to policymakers, tax authorities, and corporations, as it provides governance-oriented insights to enhance regulatory clarity, improve compliance, and strengthen legal certainty in affiliated share transfer transactions.

Fields of Study & Subjects

Corporate Taxation and Avoidance Governance Compliance and Sustainability Corporate Governance and Financial Management

Publication details

Journal / source
Corporate Law & Governance Review
Publisher
Virtus Interpress
Volume
8
Issue
2
Pages
100–100
Publication date
1 April 2026