Switzerland vs Corp, Oct. 2014, Federal Supreme Court, Case No. 4A_138-2014

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Decision on the criteria for the arm’s length test of interest rates on inter-company loans. This case i about intercompany loans created by zero balancing cash pooling and the funding of group companies by a group finance company.

The Swiss Federal Supreme Court states – If the terms of inter-company loans are not conforming to market conditions, then the payment qualifies as a distribution and a special reserve must be made in the balance sheet of the lender.

The Court also states – It is questionable from the outset whether a participation in the cash pool, by which the participant disposes of its liquidity, can pass the market conditions test at all.

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Swiss case law 4A_138-2014

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