Find your formula: Our guide to pricing intra-group loans

In today’s volatile macroeconomic climate, heightened by high interest rates, intra-group loans have become focal points for tax authorities. The application of an arm’s length interest rate in pricing these transactions has thus gained paramount importance. Organizations typically employ four main approaches—Comparable Uncontrolled Price (CUP), Cost of Funds, Economic Modeling, and Safe Harbors—to determine arm’s length prices for related-party intercompany loans.

Among these methods, CUP stands out as the preferred choice, endorsed by the OECD and tax authorities. However, rigor and precision are vital in its application, especially concerning benchmarking analysis, comparable transaction screening, and adjustments for comparability.

This paper outlines essential strategies for multinational organizations to ensure Transfer Pricing compliance and optimize financial outcomes in the face of increased scrutiny on intra-group loans by tax authorities.