The Swiss Federal Court ruled in favor of the tax authorities on July 17, 2024 in a litigation that frames a Swiss debate over the role of the annual circular on safe harbor interest rates issued by the Swiss Federal Tax Administration.
The tax authorities in China and in South Korea have issued different safe harbors with respect to the interest rates on intercompany loans. Safe harbor rates are often in conflict with what would represent an arm’s length rate. Our discussion poses a hypothetical intercompany loan from a South Korean parent corporation to its Chinese manufacturing affiliate to highlight how the arm’s length interest rate depends on the contractual terms of the loans including date, term, and currency and the credit rating of the borrowing affiliate.
In this tutorial we introduce you to a tool in the EdgarStat CUFT Loan Agreements Database for estimating the implied credit rating of your tested borrower using the Altman Z”-Score Model.