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.
TPG2022 Chapter X paragraph 10.108
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter X: Transfer Pricing Aspects of Financial Transactions | Tag: Bank opinion, Bankability opinion, Financial transactions, Interest rate, Intra-group loan, Loan, Loan offer, Treasury functions
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Supplemental Guidance
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