Interest Rate Benchmarking under UAE Corporate Tax La
Intra-group financing arrangements are under increasing scrutiny to ensure compliance with the arm’s length principle.
With the introduction of UAE Corporate Tax, intra-group financing arrangements are under increasing scrutiny to ensure compliance with the arm’s length principle.
In practice, a defensible benchmarking approach requires:
Credit Rating Assessment – establishing an entity’s standalone credit profile (and considering implicit group support) to align the borrower’s risk profile with market realities.
External CUP (E-CUP) Method – identifying comparable third-party loan data from commercial databases to benchmark interest margins, ensuring alignment with OECD TP Guidelines
Why this matters:
- Strengthens the arm’s length nature of intra-group financing.
- Mitigates challenges during FTA audits/reviews.
- Provides transparent documentation in line with UAE TP disclosure and reporting requirements.
As UAE continues aligning with global BEPS standards, E-CUP combined with robust credit rating analysis emerges as the most suitable model for defending intra-group interest rates.