Intragroup Guarantees: How To Mitigate Tax Risks

A common business practice within corporate groups is for group companies to provide guarantees for bank loans. Such arrangements can improve the creditworthiness of group companies and may enable them to obtain financing on more favorable terms. In some cases, providing such guarantees may even be a prerequisite for obtaining financing.

While this strategy may be beneficial from the perspective of enhancing a company’s borrowing capacity, it should first be analysed from the perspective of transfer pricing regulations and taxation of free of charge benefits. This can help mitigate the risk of group companies being exposed to significant tax consequences.

Transfer Pricing Documentation Requirements