Intercompany Loans Amid Virus Invite Scrutiny by Tax Authorities

Multinationals that loan money among their entities or rework existing loans to boost liquidity during the pandemic could end up attracting the attention of tax authorities.

In the current climate of market volatility, tax authorities will likely pay special attention to companies taking advantage of higher interest rates during the crisis that they typically wouldn’t do under normal circumstances, tax practitioners warn.

Intercompany loans help companies bolster their reserves during economic downturns, and higher rates can benefit a company by increasing the amount of interest expense it can deduct from its tax bill, practitioners said. They advise companies to be ...