Intercompany Loan
A loan arrangement between different subsidiaries or branches under one group.
Detailed Description
Intercompany Loan
What is the primary purpose of intercompany loans?
The primary purpose is to optimize capital use within a corporate group by allowing subsidiaries to borrow from each other.
What are some key features of intercompany loans?
Key features include varying interest rates, diverse repayment terms, formal documentation, and currency considerations.
What are the advantages of intercompany loans?
Advantages include cost efficiency, flexibility in terms, greater control for parent companies, and potential tax benefits.
What are the disadvantages of intercompany loans?
Disadvantages include regulatory scrutiny, complexity in structuring, risk of default, and potential misalignment among subsidiaries.
What regulatory considerations must companies keep in mind regarding intercompany loans?
Companies must comply with local transfer pricing laws and ensure transactions are conducted at arm's length.