Belgium: Interest rate on intra-group loan held non-arm’s length under comparable uncontrolled price method (court decision)
Court rejected taxpayer’s argument that CUP was not sufficiently comparable.
The Court of First Instance of Antwerp in June 2025 held that the taxpayer failed to prove that the fixed 5% interest rate on an intra-group loan used to finance an acquisition of shares of its parent holding company was arm’s length.
The court agreed with the tax authority’s position that external bank financing with a variable interest rate of 1.75% that the taxpayer used along with the intra-group loan to finance the share acquisition was an appropriate comparable uncontrolled price (CUP) for the intra-group loan. The court further agreed with the tax authority that using the external bank financing as a CUP, and after adjusting for the specific terms of the intra-group loan such as subordination, repayment terms, and fixed versus variable rates, the arm’s-length interest rate was 3.32%. The court thus upheld the tax authority’s denial of the taxpayer’s deduction of the excess interest expense, and as well as a 10% penalty for incorrect filing (though not for tax evasion).
The court dismissed the taxpayer’s arguments that the external bank financing was not comparable to the intra-group loan due to insufficient similarity between the terms and conditions of the two loans, and that the 5% interest rate was supported by external market interest rates (external CUP analysis) showing a range of 4.69% to 7.32%.
Read an October 2025 report prepared by the KPMG member firm in Belgium