Interest fixation(Taxwatch (Tax news in english))
24-02-2010 07:20
Af
Hans-Henrik Nilausen
Denmark has extensive transfer pricing regulations, involving among other, that all controlled transactions must take place at market terms.
In a recent tax case, a major Danish resident shareholder had provided his South Africa company with an interest free loan.
The Court found that the agreed terms of the loan were not on market terms.
Consequently, the Court found that the shareholder should be taxed on a fixed interest income.
According to practice, as a main rule, the market interest can be fixed to the debtor’s alternative borrowing rate of interest.
However, in lack of evidence of the debtor’s alternative borrowing rate of interest, the market rate can be fixed to the official Central Bank rate (at present 0,75 %) plus 4 %= 4,75 %.
In this particular case, among other due to lack of evidence of the debtor’s alternative borrowing rate of interest, the Court found, that the market interest could be fixed to the official Central Bank rate plus 4 %.
Questions can be addressed to Hans-Henrik Nilausen at hhn@bdo.dk
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