Intra-Group Loans Transfer Pricing: What’s Important in H2 2026?

Recent case law and regulatory developments provide useful guidance on what to expect in 2026 and on the approach that should be followed to mitigate the risk of challenges on intra-group loans.

Historically, tax authorities focused primarily on interest rate benchmarks when reviewing intra-group loans, cash pools and guarantees. Today, however, their analysis has become significantly broader and more sophisticated, extending to a range of interrelated factors such as contractual terms, debt capacity, and creditworthiness.

The sections below outline the key trends and risks shaping intra-group loan transfer pricing and highlight what multinational groups should address as part of their planning and compliance efforts for 2026.

Arm’s Length Terms & Conditions for Intra-Group Loans

Verifying that the terms and conditions of intra-group loans are consistent with how independent parties would contract remains a critical focus. In addition to establishing an arm’s length interest rate and the appropriate amount of debt (further explained below), it is also necessary to assess whether the other terms and conditions are at arm’s length. This involves considering the main features of the loan, and evaluating their impact on the risk profile of both the borrower and the lender, as well as on the arm’s length interest rate. Relevant terms that should be considered include currency, maturity, repayment schedule, and callability.

In 2025, courts emphasized that Transfer Pricing documentation must not only include a benchmark analysis but also a clear explanation of the contractual features agreed, especially for features such as subordination, maturity, interest structures, and repayment conditions. These features should align with the actual conduct of the parties and with the economic reality.

Multinationals have also seen a rise in challenges derived from discrepancies between the legal agreements drafted, the price applied between the entities involved, and the information presented in the Transfer Pricing report. A clear example is one-year loans that are automatically renewed, with the same price being applied and with no repayments being made, where tax authorities may reclassify them as longer-term arrangements, which typically carry a higher interest rate.

What to consider in 2026: It is important for multinational enterprises to carefully assess these terms and conditions before issuing a loan, as they will have a direct impact on the interest rate applied to the transaction. Drafting a comprehensive loan agreement that clearly outlines these terms, aligns with the conditions applied in practice, and is supported by a robust Transfer Pricing analysis is recommended to mitigate the risk of challenges by tax authorities.

Debt Capacity Analyses for Intra-Group Loans

Tax authorities are increasingly scrutinizing whether the amount of intra-group debt is economically justified and supported by a clear business purpose. They are also evaluating whether the debt aligns with arm’s length principles and serves a legitimate economic function consistent with the borrower’s overall business strategy.

A debt capacity analysis is often conducted to determine whether the borrower has the financial capacity to repay the loan and whether an unrelated party would provide a similar amount of financing under comparable conditions. If tax authorities consider that the amount of debt is excessive, adverse tax consequences could arise, such as the requalification of the debt as equity and/or the denial of a portion of the interest expense deduction.

Over the last two years, jurisdictions such as Germany and Australia introduced administrative guidelines formalizing debt capacity considerations. This trend has been further reinforced by case law in different countries over the past year. For example, in Luxembourg, a major hub for treasury companies and investment funds, the Luxembourg Administrative Court in 2025 issued a pivotal decision in case No. 50602C rejecting an automatic 85:15 debt-to-equity standard and holding that arm’s length analyses must be fact-specific and supported by data rather than mechanical ratios.

What to consider in 2026: Multinationals are expected to prepare robust debt capacity analyses for each borrower entity, demonstrating that independent lenders would extend a similar amount of debt. The debt quantum should be supported by financial projections, coverage ratios, and a documented business purpose, all included in the corresponding Transfer Pricing report.

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Credit Rating Analyses for Financial Transactions: Stand-Alone vs Group Rating

Both tax administrations, and subsequently, courts, are scrutinizing the credit rating approaches applied by taxpayers in the context of intra-group loans. Credit rating analyses are a core step when pricing intra-group loans, as the risk profile of the borrower has a material impact on the applicable interest rate.

While simplified blanket ratings across a group were once tolerated, tax authorities and courts are now emphasizing the importance of entity-specific ratings adjusted for implicit support.

In Belgium, on June 6, 2025, the Court of First Instance of Leuven clarified that credit ratings must be substantiated and not merely assumed based on group affiliation. Based on this ruling, the borrower should be assessed on a stand-alone basis, taking into account the impact of the new debt quantum on its financial position. Where implicit group support is considered, it must be properly substantiated through a thorough implicit support analysis and cannot be assumed by default our automatically applied.

In the Netherlands, the Court of Appeal of Amsterdam, in its judgment of 11 September 2025, addressed, among other topics, the guarantee fees applied by the taxpayer and rejected their payment, emphasizing the importance of factoring implicit support into the credit rating applied to the borrower. This once again highlights the relevance of a two-step process: first, the calculation of the stand-alone rating, and second, the adjustment of this rating for implicit support.

As this is a highly relevant topic, and both the lender’s jurisdiction (seeking a lower credit rating, which drives higher interest income) and the borrower’s jurisdiction (seeking a higher credit rating, which drives lower interest expense) have opposing incentives, multinationals need to have a robust and consistent process in place.

What to consider in 2026: Companies should apply a consistent methodology for credit rating analyses based on the principles and best practices set out in Chapter X of the OECD Transfer Pricing Guidelines. Where possible, this involves performing an individual credit rating analysis for each borrower, adjusted for group implicit or explicit support. In addition, this analysis should be properly documented in the Transfer Pricing report.

H2 2026 update: Credit rating determination is a contentious issue not only in Europe. In the US, the IRS’s position on implicit support is being tested in Eaton Corp v. Commissioner, No. 2608-23. This case is currently pending before the US Tax Court. Part of the case revolves around the borrower’s credit rating and whether implicit support has been appropriately considered. The IRS has separately signaled that they are considering issuing a new regulation that clarifies the impact of implicit group support on a borrower’s credit rating and the requirement that any such support be taken into account when determining the borrower credit rating.

Cash Pooling Structures and Synergy Allocation

Cash pooling structures remain an area of intense scrutiny by tax authorities worldwide. Cash pool Transfer Pricing analyses can be complex and time-consuming for a variety of reasons.

On the one hand, the participants’ accounts need to be priced on an arm’s length basis (considering the specific currency and the risk profile of each entity). This also includes identifying long-term structural balances and pricing them separately, where relevant. On the other hand, the cash pool leader needs to receive appropriate remuneration for the functions performed, risks assumed, and assets employed.

In addition, the OECD Transfer Pricing Guidelines state in paragraph 10.143 that: “The remuneration of the cash pool members will be calculated through the determination of the arm’s length interest rates applicable to the debit and credit positions within the pool. This determination will allocate the synergy benefits arising from the cash pool arrangement amongst the pool members and will generally be done once the remuneration of the cash pool leader has been calculated.”

Tax authorities are increasingly considering these recommendations, and this is becoming particularly relevant in jurisdictions where multinational enterprises have cash-rich pool entities, as tax authorities may expect that a portion of the synergies generated is allocated to them.

Finally, the involvement of multiple countries adds further complexity, as local jurisdiction-specific interpretations of the OECD Transfer Pricing Guidelines may arise. Over the past year, for example, a notable case was issued by the Spanish Supreme Court on July 15, 2025 (ruling 3721/2025). In its decision, the Court rejected the asymmetry of interest rates depending on whether they related to deposits made by the Spanish subsidiary or to amounts received by it as a loan, and emphasized that the remuneration of the leading entity must be consistent with its functions as a mere treasury centralization entity. This highlights the importance of following a coherent methodology based on the OECD Transfer Pricing Guidelines in order to support the position adopted in the event of a challenge by local tax authorities.

What to consider in 2026: Multinationals with cash pooling structures, especially where the amounts involved are material, should perform a Transfer Pricing analysis in line with the best practices set out in the OECD Transfer Pricing Guidelines. This includes: 1) pricing the debit and credit positions of the participants, identifying structural balances; 2) calculating the synergy benefits generated by the structure; and 3) allocating these synergies between the cash pool leader and the participants.

H2 2026 update: A related development from Poland reinforces the need for granular treatment of cash pools, albeit from a documentation angle. The Director of Poland’s National Revenue Information recently published an individual tax ruling noting that settlements within a physical cash pooling structure can constitute separate controlled transactions for each participant, with debit and credit positions assessed individually rather than netted when testing the local TP documentation threshold. It’s a useful reminder that documentation obligations require the same jurisdiction-by-jurisdiction rigor as pricing itself. Proactive participant-level reporting can help with tracking both withdrawal and deposit positions accurately and ensure that you have the necessary documentation in place.

Preference for Internal CUP Comparables

The Comparable Uncontrolled Price (CUP) method has long sat at the top of the OECD’s method hierarchy for intercompany transactions, including financial transactions. Specifically, when available, internal comparable arrangements are the favored starting point for any transfer pricing analysis.

While the use of an internal CUP is preferrable, in practice, many taxpayers use external CUPs to price their intercompany financing arrangements. Some jurisdictions appear to be formally affirming the preferred process outlined by the OECD: review any existing internal arrangements and apply these as part of the transfer pricing analysis if there is appropriate comparability between the tested transaction and the internal CUP arrangement. Where possible, application of both an external CUP and an internal CUP will ensure even stronger support for a transfer pricing position. The use of both approaches effectively corroborates one another.

Belgium’s Court of First Instance in Antwerp delivered a judgement on 16 June 2025, signalling the court’s preference for the use of internal comparables (the taxpayer’s own external financing) over external market data where both are available. The taxpayer had financed an acquisition partly through an external bank loan and partly through a subordinated shareholder loan, which was priced using external market data. The Belgian tax authority challenged this approach, contending that the taxpayer’s own external bank loan should have been used as the comparable arrangement on which to determine an arm’s length interest rate for the subordinated shareholder loan. The court ultimately agreed with the tax authority and upheld the approach to apply the internal CUP method. While the court ruled in favor of the use of an internal comparable, it did also note that prudent application of such an arrangement does still entail ensuring an appropriate degree of comparability and factoring in any adjustments as needed.

This is not a new rule so much as a court holding taxpayers to an existing standard and aligning with OECD guidance.

What to consider in H2 2026: Multinationals should proactively assess their external financing arrangements across the group to identify potential internal comparables that could be used to price their intercompany financing arrangements. Robust comparability assessments should also be carried out to ensure that any internal comparable is indeed appropriate for use in pricing an intercompany arrangement. Where a potential internal CUP exists but is not used, the rationale for its exclusion should be documented in the Transfer Pricing report. The use of both an internal CUP and an external CUP presents as the most robust support for a pricing determination of an intercompany financing arrangement.

Key Takeaways for Intra-Group Loans Transfer Pricing in 2026

• Tax authorities are moving beyond interest rate benchmarking and increasingly focusing on the full arm’s length characterization of intra-group loans, including contractual terms and economic substance.
• Debt capacity analyses are becoming increasingly important, as evidenced by recent regulatory developments and case law.
• Credit rating analyses should be performed on a stand-alone basis and adjusted for implicit or explicit group support, in line with the OECD Transfer Pricing Guidelines.
• Cash pooling arrangements require careful allocation of synergies between participants and the cash pool leader based on functions, risks, and realistic alternatives. Careful documentation at the leader and at the individual participant level will provide an additional level of support for cash pooling positions.
• Robust and consistent transfer pricing documentation remains essential to mitigate the risk of challenges in an environment of heightened scrutiny.
• Where an appropriate comparable external financing arrangement already exists within the group, courts are increasingly expecting taxpayers to consider its use in pricing intercompany arrangements.

Zanders Transfer Pricing Solution  

As tax authorities intensify their scrutiny of loans, cash pools, and guarantees, it is essential for companies to carefully adhere to the recommendations outlined above.Does this mean that additional time and resources are required? Not necessarily.

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