Assessing Inter-Company Transactions and Accounting Implications during Economic Uncertainty
/Inter-company financial transactions
During periods of crisis, the financial sector may experience significant repercussions on transactions. The disruption to normal activity leads to a lack of liquidity and extra limits on external financing, potentially making financial transactions unprofitable.
Hence, in this context, multinational companies are increasingly using centralised treasury techniques in order to optimise and rationalise their financial function.
One of the areas of particular concern to tax authorities is in regard to inter-company financing. In particular, where it relates to an intra-group loan, which is considered to comply with the principles of free competition whenever the interest rate applied is equal to the one that would have been applied between independent parties.
Published in: International Tax Review (ITR) - 1 May 2020
