Transfer pricing continues to evolve, along with the expectations placed on multinational groups to demonstrate arm's length conditions in related-party transactions. Recent court decisions, legislative proposals and updated guidance provide new perspectives on intragroup financing, documentation requirements and the commercial rationale underlying intercompany arrangements.
The latest edition of BDO Transfer Pricing News (Issue 56) explores developments across five jurisdictions: Italy, Luxembourg, Malta, Vietnam and South Africa. While the legal frameworks differ, a common theme emerges: increasing scrutiny of the economic substance of transactions, their commercial justification and the quality of supporting documentation.
Key highlights of this issue
- Recent court rulings addressing intragroup guarantees and financing arrangements.
- Further guidance on material changes to existing intercompany agreements.
- Updated compliance requirements for transfer pricing documentation and international reporting.
- Proposed extensions of arm's length rules to certain domestic related-party transactions.
Intragroup financing under judicial scrutiny
Two important court decisions in Italy and Luxembourg demonstrate that intragroup financial transactions should not be assessed solely on the basis of contractual terms. The actual economic circumstances, risks and realistically available options of the parties are also essential.
Italy: Can an intragroup guarantee be provided without a fee?
The Italian Supreme Court considered a case in which a subsidiary provided security for its parent company's financing without receiving remuneration.
The Court confirmed that the absence of a guarantee fee does not automatically constitute a breach of the arm's length principle, provided that genuine commercial reasons and demonstrable economic benefits exist for the guarantor. A general reference to the interests of the group, however, is not sufficient.
Luxembourg: Interest waivers in financial restructurings
The Luxembourg Administrative Court examined whether an interest waiver agreed as part of an intragroup debt restructuring could comply with the arm's length principle.
The ruling emphasised the importance of considering the borrower's actual financial circumstances and the lender's realistically available options when the financing terms are amended. Under certain circumstances, an independent lender may also agree to modify the terms of a loan where doing so is commercially justified.
Regulatory developments and documentation requirements
Malta: When do contractual changes affect transfer pricing?
Updated guidance in Malta clarifies when amendments to existing related-party arrangements may be considered material alterations. The assessment focuses on the functions performed, assets used, risks assumed and the actual conduct of the parties. Material changes may trigger the application of transfer pricing rules earlier than expected for certain legacy arrangements.
Vietnam: Updated transfer pricing documentation rules
A new decree effective from 1 July 2026 introduces several changes to Vietnam's transfer pricing framework. Key developments include increasing the annual revenue threshold for a specific documentation exemption from VND 200 billion to VND 500 billion, alongside further clarification of benchmarking requirements and Country-by-Country Reporting obligations. Additional conditions apply to the documentation exemption.
South Africa: Arm's length rules for domestic transactions
Proposed legislation in South Africa would introduce an arm's length requirement for certain domestic related-party transactions involving companies operating in special economic zones. The proposal aims to address inappropriate profit shifting into preferential tax regimes. The changes remain proposals and have not been enacted under the framework discussed.
What do these developments mean for multinational groups?
These judicial and regulatory developments reinforce the need for transfer pricing policies to reflect actual commercial circumstances. Multinational businesses should pay particular attention to:
- The commercial rationale supporting intragroup guarantees and financing arrangements.
- Contemporaneous documentation of changes to financing and commercial terms.
- Regular reviews of existing intercompany agreements.
- Local compliance requirements, documentation exemptions and international reporting obligations.
While these developments do not automatically change the rules applicable to Slovak companies, they offer valuable insight into evolving international approaches to transfer pricing compliance and risk management.
Transfer Pricing News: Explore developments by country
Explore the topics in more detail through the original articles prepared by BDO professionals worldwide. Select a country below to read the full article on BDO Global.
Source: BDO Transfer Pricing News – Issue 56, September 2026 . This article provides general information only and does not constitute individual tax advice.