<![CDATA[This study examines the constitutional limits of judicial interpretation in determining the deductibility of interest expenses and foreign exchange losses arising from affiliate financing, with reference to Indonesian Tax Court Decision Number PUT-000769.15/2022/PP/M.IIB of 2023. Using prescriptive normative legal research through statutory, case, conceptual, and comparative decision approaches, it analyzes the relationship between tax legality, legal certainty, legislatively enacted norms, and judicially constructed norms. The study maps the respective functions and requirements of Article 6 and Article 9 paragraph (1) letter b of the Income Tax Law and Article 12 of Government Regulation Number 94 of 2010. The analysis finds that an affiliate relationship cannot, by itself, establish the “personal interest” element expressly required under Article 9 paragraph (1) letter b. When affiliation substitutes for proof of the beneficiary’s statutory identity, capacity, and personal interest, judicial interpretation risks extending a tax prohibition beyond the boundaries established by the legislature. This concerns not merely statutory misapplication but also tax legality and legal certainty because it may impose an additional fiscal burden without a sufficiently identifiable statutory basis. The decision also relies on an aggregate financing allocation without adequately examining the utilization of each loan facility. To address these problems, the study develops a four-stage Affiliate Financing Deductibility Test comprising statutory subject-matter identification, business-nexus assessment, specific-exclusion and personal-interest testing, and allocation and evidentiary proportionality. This framework ensures that judicial reasoning remains traceable to statutory elements and distinguishes failure to establish deductibility from failure to prove a specific statutory exclusion.]]>
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