September 30, 2026
Netherlands - Court Highlights Transfer Pricing Documentation for Intragroup Financing
Summary
On September 10, 2026, the Court of Appeal of The Hague published its final judgment concerning the arm’s-length pricing of intragroup credit facilities. The case involved a Dutch company that deducted approximately €1.283 billion in interest and commitment fees for financial years 2012/2013 through 2016/2017. The Court concluded that €903 million of these costs was deductible and disallowed the remaining €380 million.
The judgment addresses several transfer pricing issues, including borrower creditworthiness, the selection of comparable transactions, comparability adjustments, the application of the arm’s-length range, and the assessment of total financing costs. It also highlights the significance of contemporaneous transfer pricing documentation, particularly where deficiencies may affect the burden of proof in a tax dispute.
Key Points
Total-Cost Approach and Ex Ante Assessment
The dispute concerned intragroup credit facilities under which a Dutch company paid variable interest on amounts drawn and commitment fees calculated by reference to the total facility amounts, including undrawn capacity.
The Court accepted the use of a total-cost approach, under which interest and commitment fees may be assessed together rather than tested separately. The analysis must reflect the circumstances and information reasonably available when the financing arrangements were entered into.
In applying this approach, the Court used forward rates to assess expected financing costs on an ex ante basis. This approach focuses on the expected costs at the time the arrangements were established, rather than relying on hindsight or information that was not available at that time.
The judgment therefore emphasizes the importance of using contemporaneous market information and documenting the assumptions underlying the pricing analysis.
Borrower Creditworthiness and Group Support
The Court considered the borrower’s creditworthiness when assessing the arm’s-length financing costs. The analysis involved the borrower’s credit ratings and the evidence supporting the pricing of the facilities.
Both explicit support, such as a guarantee, and implicit support arising from group membership may be relevant to a borrower’s creditworthiness. These factors should be considered alongside the borrower’s own financial and operational profile.
A parent company’s credit rating should not automatically replace a borrower-specific credit analysis. Instead, the assessment should explain how the borrower’s standalone creditworthiness and relevant group support affect the terms that independent parties would have agreed.
Selection of Comparable Transactions and Comparability Adjustments
The Court examined the reliability of the comparable transactions and the adjustments proposed by the taxpayer and the tax authority. It found deficiencies in aspects of the taxpayer’s benchmarking analysis, including adjustments that were not supported by sufficiently reliable evidence.
The judgment highlights the importance of selecting comparable transactions based on their actual comparability and the reliability of the available information. Relevant factors may include credit ratings, loan terms and conditions, and other characteristics affecting the financing arrangements.
Comparability adjustments should be supported by reliable evidence and a clear explanation of how the differences affect the results. Where a material difference cannot be reliably adjusted for, the reliability of the proposed comparable should be reconsidered.
Application of the Arm’s-Length Range
The Court addressed the use of an arm’s-length range when assessing the total financing costs. Where a small number of highly reliable comparable transactions supports a defensible range, the tax authority should not automatically adjust the taxpayer’s pricing to the median if the upper end of the range remains an acceptable arm’s-length outcome.
The judgment also illustrates that the quality of comparable transactions can be more important than the size of the dataset. In appropriate circumstances, a single highly reliable comparable may support an arm’s-length price.
The appropriate point within a range should therefore be determined by reference to the reliability of the comparable transactions and the facts of the case, rather than by mechanically applying the median or another statistical measure.
Transfer Pricing Documentation and Burden of Proof
The Court identified significant deficiencies in the taxpayer’s support for the financing costs claimed. The case illustrates that shortcomings in transfer pricing documentation may have consequences beyond the determination of an arm’s-length price.
In this case, the deficiencies contributed to the Court’s conclusion that the taxpayer had not filed the required tax return within the meaning of the applicable Dutch tax law. Consequently, the burden of proof was reversed and aggravated, requiring the taxpayer to convincingly demonstrate that the tax assessments were incorrect.
Although the taxpayer’s position was not rejected in every respect, the shifted burden of proof made it more difficult to defend the claimed deductions. The judgment highlights the importance of maintaining contemporaneous credit analyses, benchmarking studies, supporting evidence for comparability adjustments, and records of the information available when the financing arrangements were established.
Outcome of the Case
The Court concluded that the total financing costs deducted by the taxpayer were not arm’s length for several of the credit facilities, while the costs associated with one facility were not adjusted on that basis.
Across the financial years in dispute, €903 million of financing costs was allowed as deductible, and €380 million was disallowed.
The judgment demonstrates that the outcome of an intragroup financing dispute depends not only on the pricing methodology but also on the reliability of the supporting evidence and the applicable burden of proof.
Practical Considerations
The judgment highlights two broader lessons for transfer pricing practice. First, contemporaneous documentation is important not only to support the arm’s-length nature of a transaction but also to protect a taxpayer’s position in a tax dispute. Second, the reliability of a benchmarking analysis depends on the quality of the comparables and the evidence supporting any comparability adjustments, rather than simply the number of observations included in the analysis.
These considerations are relevant beyond intragroup financing and reinforce the importance of maintaining a clear, evidence-based record of the analysis performed and the information available when a transaction was priced.
For intragroup financing arrangements, taxpayers should retain borrower-specific creditworthiness assessments, evidence supporting the treatment of explicit and implicit group support, reliable benchmarking results, and the rationale for any comparability adjustments. Where interest and commitment fees are evaluated together, the analysis should also document the basis for the total-cost approach and the use of forward rates in assessing expected financing costs.
Source
Gerechtshof Den Haag (Court of Appeal of The Hague), *ECLI:NL:GHDHA:2026:2462*, judgment dated August 5, 2026, published September 10, 2026.
Official judgment:
https://uitspraken.rechtspraak.nl/details?id=ECLI%3ANL%3AGHDHA%3A2026%3A2462
Official court announcement, *Renteaftrek binnen internationaal concern is voor deel onzakelijk* (September 10, 2026):
------------------------------------------
Disclaimer:
This content is for general informational purposes only and does not constitute professional advice.
Information provided herein is based on publicly available sources as of the publication date and may be subject to change.
Armize consulting | Transfer Pricing