Intra-group financing is one of the most scrutinised areas of transfer pricing. Selecting reliable comparables for loans and interest rates requires more than pulling a database range; it requires a clear view of the borrower, the terms and the wider commercial context.
Start with the accurate delineation
Before benchmarking, the transaction must be accurately delineated: is it genuinely debt, what is the borrower's standalone credit profile, and what would independent parties have agreed in comparable circumstances?
Building a defensible interest rate
- Credit rating, establish the borrower's rating, taking account of any implicit group support.
- Loan terms, currency, maturity, seniority, security and any covenants.
- Market data, bond or loan comparables with similar risk characteristics, adjusted as needed.
Common pitfalls
Groups frequently rely on the parent's borrowing cost rather than the borrower's own profile, or apply a single rate across very different facilities. Both invite challenge.
“An intra-group rate is defensible when it reflects what the borrower, not the group, could have obtained on the open market.”
How TPTAX can help
We provide research, training and limited scope advisory support on intra-group financing and economic benchmarking across Africa and the Middle East (GCC countries). Get in touch to discuss your group's position.