Assume 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 and conditions and at the same interest rate charged by the independent lender (i.e. an interest rate premised on the existence of an A credit rating). Assume further that the independent lender, in setting its terms and conditions, was aware of S’s other borrowings including the simultaneous loan to S from T.
TPG2022 Chapter I paragraph 1.185
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter I: The arm's length principle | Tag: Credit rating, Example 1 - group rating vs stand alone rating, Financial transactions, Group synergies, Incidental benefits, Interest rate, Notching, Synergies
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