Financial transactions, particularly loans, are among the most common arrangements within corporate groups and simultaneously one of the highest-risk areas during tax audits. Our analysis provides an objective assessment confirming that the remuneration applied between related parties is consistent with the arm’s length principle.
As part of the service, we prepare:
1. Assessment of the nature and justification of the transaction: identification of the borrower’s credit rating or the group rating, determination of the factual circumstances of the transaction.
2. Selection of the appropriate set of comparable data: identification of the relevant data set (internal data or external databases),verification of data availability and selection of search criteria (e.g. nominal value, reference rate, currency, collateral).
3. Benchmarking analysis (CUP method): selection of the appropriate external database (e.g., Cbonds, Reuters),initial automated filtering based on criteria identified in previous steps (reducing the universe from several million to several thousand results),narrowing the results to a set suitable for manual screening — typically around 150 issuers or instruments, obtaining the final sample (from 5 to 50 results) and determining the interquartile or full arm’s-length range.
4. Documentation and argumentation: preparation of a draft analysis in Word format, including appendices with financial data and calculations, preparation of conclusions for Local File or Master File documentation, exchange of comments and delivery of the final version (approx. 15 pages in Word + Excel and PDF attachments).
Client outcomeThe analysis not only confirms compliance with the arm’s length principle but also organises financial transaction processes within the group, reduces tax-related risks, and prepares the organisation for potential audits.
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