A 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 Appeal upheld the assessment in January 2024, dismissing the taxpayer's appeal in full ... Read more

Such 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 make a loan, a commercial lender will undertake the relevant due diligence and approval processes that would precede a formal loan offer. Such letters would not therefore generally be regarded as providing evidence of arm’s length terms and conditions ... Read more

In 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 enterprise ... Read more

A Portuguese fast food subsidiary funded by a US parent company faced tax authority corrections after a 2004 audit disallowed excess interest deductions under thin capitalisation rules. The company argued its indebtedness was equivalent to that of an independent entity and challenged the restrictions on EU free movement of capital grounds. The Tribunal Central Administrativo Sul ruled in favour of the taxpayer in April 2021 ... Read more

A Slovenian company sought a refund of withholding tax on interest paid to a related Dutch entity, arguing its 2.05% contractual rate was arm's length. The tax authority found the rate exceeded the recognised benchmark of 1.226% and rejected the supporting evidence, including a non-binding bank offer and Bank of Slovenia data. The Administrative Court upheld the tax authority's decision in April 2021, finding the taxpayer had not met the burden of proof ... Read more

Studialis issued bonds to foreign group partners at 10% interest, which French tax authorities challenged as exceeding the Article 212 CGI safe harbour rate. The authorities rejected all supporting evidence, insisting only on contemporaneous loan offers. The Paris Administrative Court of Appeal sided with Studialis in 2020, finding that independent bank certificates combined with a RiskCalc comparability study sufficiently justified the 10% rate ... Read more

A Swiss group company deposited excess liquidity in an intra-group cash pool at LIBID-based rates. The Swiss tax administration recharacterised the minimum cash pool balance as a long-term loan subject to safe harbour interest rates. The Administrative Court upheld this approach in December 2016, confirming the recharacterisation and the applicable safe harbour rates, ruling largely in favour of the tax authority ... Read more