Intra Group Funding Agreement

There may be cases where, instead of attributing the benefit of an agreement to a third party, the original parties reseed each other`s obligations under that agreement and recreate them in fact, the third following in the footsteps of one of the original parties. These are transfer pricing issues related to intragroup financing, which can cover a wide range of different areas. For example, loan agreements, guarantee and guarantee agreements, intragroup cash pools and various types of safeguard mechanisms and guarantee instruments are typical elements of intragroup financing agreements. The arm length principle is based on the separate entity approach. This means that each related party is considered a separate entity independently of the group. For example, a credit subsidiary is considered a non-partisan party when the compound interest on the loan is established. A strong solvency position and the assets of the parent company have no direct effect on the solvency and guarantees of the subsidiary, which means that they also do not determine the compound interest charged by the subsidiary. Intragroup financial transactions are an essential part of the activity of multinationals (MNEs). From a transfer pricing perspective, it is important to ensure that the terms and conditions for intra-group financial transactions are in line with the terms agreed upon by independent companies and that the profits paid to the related party correspond to the profits that would be paid to an independent entity in a similar situation. Financing agreements are an essential aspect for multinationals (MNEs) that have either acquired or organically grown. This may include funding agreements within an MNE group. With regard to transfer pricing of financing operations, the main objective is to ensure that intra-group financing conditions are identical to those agreed by independent entities in a similar situation. With regard to intra-group financing, it is essential to ensure that, in all situations, the lender receives a return on its investments.

Despite the complexity of these financing agreements, SMEs are often overlooked in the structure of their financial affairs, as they relate to aspects related to transfer prices for intragroup loans.