Intragroup financing is another form of service between associated persons, which falls under subsection 140A(2), in the form of financial assistance that include loans, interest bearing trade credits, advance or debt and the provision of any security or guarantee. The financial assistance arrangements between associated persons can arise from the following situations:
- Where a taxpayer, directly or indirectly, acquires from or supplies to an associated person financial assistance for a consideration; or
- Where a taxpayer supplies financial assistance directly or indirectly to an associated person without consideration.
In both situations, the taxpayer should charge or pay the associated person interest at a rate which is consistent with the rate that would have been charged in a similar transaction between independent persons dealing at arm's length.