LEADING THE WAY
How to determine Related-Party loan rates
- Published: 19 Mar 2013 at 00.00
- Newspaper section: Business
Multinational companies generally fund their subsidiaries either through debt or equity. When debt funding is used, the subsidiaries pay interest back to the parents. Since the interest payments are generally tax-deductible, different interest rates charged between related parties will result in different effective tax rates faced by group of companies. This article aims to explore existing regulations and address what should be the appropriate interest rates charged between related parties.
In Thailand, there is no specific provision regarding how the interest rates of related-party loans should be determined.
From a related-party lender's perspective, Section 65 bis (4) of the Revenue Code states that in the case where money is lent without any interest or with an interest lower than the market value without reasonable ground, the revenue officer has the power to assess the interest to be at the market value on the date of the lending.
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