TPcases

Database of Transfer Pricing Case Laws

Spain vs “TW XZ SA”, October 2023, TEAC, Case No 00-03317-2020; 00-03316-2020

Posted on October 30, 2023 | By Courts of Spain | No comments

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“TW XZ SA” was subject to an assessment in relation to intra-group loans and cash pools for Fiscal Year 2013 – 2016.

The tax authorities found that the credit rating used by the company (BBB) in determining the interest rate was incorrect as it did not take into account that “TW XZ SA” was part of a larger group. The credit rating of the company was instead determined to be (A).

Furthermore the tax authorities found that the remuneration of a group cash pool leader could be determined as 5% of its cost base by reference to guidance on low value adding intra-group services.

A complaint was filed by “TW XZ SA”.

Judgment of the court

The Court dismissed the complaint and ruled in favour of the tax authorities.

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Related Guidelines

TPG2022 Chapter X paragraph 10.82Where this is the case, the credit rating of the MNE group may also be used for the purpose of pricing the accurately delineated loan where the facts so indicate, particularly in situations such as where the MNE is important to the group as described in paragraphs 10.78 and 10.79...

TPG2022 Chapter X paragraph 10.81It is also important to note that although there are established approaches to estimate a credit rating for a particular group member or debt issuance, the considerations detailed above mean that a pricing approach based on the separate entity credit ratings that are derived from publicly available financial tools (see...

TPG2022 Chapter X paragraph 10.80The impact of an assessment of implicit support is a matter of judgment. The kind of information on which the MNE group would base a decision of whether or not to provide support to a borrower in particular circumstances may not be available to a tax administration, as is frequently...

TPG2022 Chapter X paragraph 10.79Another key consideration would be the likely consequences for other parts of the MNE group of supporting or not supporting the borrower. The criteria used to determine the status of an entity in this regard may include such considerations as legal obligations (e.g. regulatory requirements), strategic importance, operational integration and...

TPG2022 Chapter X paragraph 10.77In the context of intra-group loans, this incidental benefit that the MNE is assumed to receive solely by virtue of group affiliation, is referred to as implicit support. The effect of potential group support on the credit rating of an entity and any effect on that entity’s ability to borrow...

TPG2022 Chapter I paragraph 1.185Assume that S borrows EUR 50 million from an independent lender at the market rate of interest for borrowers with an A credit rating. Assume further that S simultaneously borrows EUR 50 million from T, another subsidiary of P, with similar characteristics as the independent lender, on the same terms...

TPG2022 Chapter X paragraph 10.108Such an approach would represent a departure from an arm’s length approach based on comparability since it is not based on comparison of actual transactions. Furthermore, it is also important to bear in mind the fact that such letters do not constitute an actual offer to lend. Before proceeding to...

TPG2022 Chapter X paragraph 10.107In some circumstances taxpayers may seek to evidence the arm’s length rate of interest on an intra-group loan by producing written opinions from independent banks, sometimes referred to as a “bankability” opinion, stating what interest rate the bank would apply were it to make a comparable loan to that particular...

TPG2022 Chapter X paragraph 10.106The reliability of economic models’ outcomes depends upon the parameters factored into the specific model and the underlying assumptions adopted. In evaluating the reliability of economic models as an approach to pricing intra-group loans it is important to note that economic models’ outcomes do not represent actual transactions between independent...

TPG2022 Chapter X paragraph 10.105In their most common variation, economic models calculate an interest rate through a combination of a risk-free interest rate and a number of premiums associated with different aspects of the loan – e.g. default risk, liquidity risk, expected inflation or maturity. In some instances, economic models would also include elements...

Supplemental Guidance

Spain vs “Group Rating SA”, November 2023, TEAC, Case No RG 8283/2020A Spanish company received an assessment challenging the credit rating used to price intra-group loans. The tax authority argued that group membership and implicit parental support required applying the group's consolidated credit rating rather than a stand-alone rating. The TEAC upheld the assessment in November 2023, confirming that notching up...

Spain vs “XZ ESPAÑA SA”, October 2025, TEAC, Case No Rec. 00-04821-2022-00A Spanish subsidiary of a multinational consumer goods group was audited for 2015–17 over contract manufacturing services, intra-group loans, and cash pooling arrangements. The tax authority rejected part of the taxpayer's comparable set and adjusted margins to the median, also applying group credit ratings and substituting Euribor with Eonia. Spain's...

Finland vs A Oyj, May 2021, Supreme Administrative Court, Case No. KHO:2021:66A Finnish parent company charged interest on loans to its Russian subsidiary based on the group's external financing costs plus a margin. The Finnish Tax Administration argued that ZAO C's standalone credit rating should determine the arm's length rate, proposing significantly higher margins. Finland's Supreme Administrative Court ruled in favour...

Belgium vs R.B. NV, June 2023, Court of First Instance, Case No. 2021/2991/AA Belgian company had set interest rates on a loan to its Swiss group affiliate using the S&P credit rating method, applying a one-notch correction as a moderately strategic entity. The tax authority argued the company was a core entity deserving the group rating. The Court of First Instance in...

Spain vs Bunge Iberica SA, March 2023, Audiencia Nacional, Case No SAN 2118/2023 – 113/2020 -ECLI:ES:AN:2023:2118Bunge Iberica SA participated in its group's cash pooling arrangement as both borrower and fund provider. Spanish tax authorities adjusted the interest rates applied to deposits and withdrawals, basing them on a group credit rating. The National Court rejected Bunge Iberica's appeal in March 2023, confirming that the pool leader...

Spain vs Bunge Iberica SA, July 2025, Supreme Court, Case No SAN 3721/2025 – ECLI:ES:TS:2025:3721Bunge Iberica SA participated in its group's cash pooling arrangement as both borrower and fund provider. Spanish tax authorities adjusted deposit and withdrawal interest rates symmetrically using a group credit rating. After rejections by the Tax Court in 2019 and the National Court in 2023, Spain's Supreme Court dismissed Bunge...

France vs SAS SSI Logistics, January 2024, CAA, Case No 22NT03720A French subsidiary of Bunge deducted interest on loans from related party Bunge Finance BV, with loan agreements backdated to 2012 despite being signed in November 2014. The French tax authority denied the deductions, finding the arrangement retroactive and the interest rates not at arm's length. The Administrative Court of...

Spain vs “X Iberica SA”, October 2019, TEAC, Case No Rec. 6537/2017A Spanish subsidiary participated in its multinational group's cash pooling arrangement as both borrower and fund provider. The tax authority challenged the asymmetric interest rates applied to credit and debit transactions and applied a group credit rating instead. The TEAC dismissed the taxpayer's complaint in 2019, confirming that both transaction...

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