Abstract
In two recent landmark decisions, the German Federal Tax Court has reaffirmed its preference for applying the (internal or external) CUP method for the determination of intra-group interest rates if comparables are less than ideal. While the creditworthiness of the borrower should be regarded on a stand-alone basis, the effects of the group affiliation may need to be considered. The burden of proof regarding the arm’s length nature of intra-group interest rates rests with the tax authorities.
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