Financial Transactions: Special Considerations of Borrower’s Debt Capacity – Is It a Loan or Equity? Case Study

This article examines the transfer pricing treatment of intra-group financial transactions, with a particular focus on the borrower’s borrowing and repayment capacity. Through both theoretical analysis and a practical case study, it considers when related-party financing may be respected as debt and when it may instead be recharacterized as equity for tax purposes.