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Rate of interest on Intra-Group Loans for Real Estate Assets the final End of Mezzanine Debt?

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Rate of interest on Intra-Group Loans for Real Estate Assets the final End of Mezzanine Debt?

Consequently, whether or not the interest put on the financial institution loan could possibly be comparable, it nevertheless requires comparability modifications. As suggested within the OECD Transfer Pricing recommendations comparability modifications are expected simply because they “increase the dependability of this outcomes.

The changes that have to be done should take into account the undeniable fact that:

  • Intra-group debts aren’t senior and are also subordinated to your financial loan;
  • Intra-group debts don’t have any pledge or guarantees;
  • Intra-group debts’ maturity is much much longer set alongside the bank financial obligation.

A premium or margin is added to the bank loan interest rate to account for the difference in priority, maturity and/or security.

The financial court ruled that the recognition of a loan relationship between affiliated companies does not require collateral to be provided by the related borrowing company in the German decision.

Interestingly, the court included that neither the possible lack of security nor the subordinated nature of SHLs can justify a danger premium whenever interest that is performing benchmarking analyses. Read More →