A loan between two companies in the same group — can the rate be anything?

Even when a loan sits between two companies owned by the same person, the arm's length principle requires the interest rate to be close to what two independent parties would have agreed under the same circumstances — same repayment term, same risk level, and the same market conditions at the time.

An inflated rate (to boost the deductible expense in one company and shrink taxable profit) or a 0% rate with no commercial justification are both exposed to adjustment if the authority reviews them. Good documentation — such as benchmarking against comparable bank lending rates at the time the agreement was signed — is what protects the file, not just the fact that both parties belong to the same group. RASEEKH helps set and document a reasonable rate before the agreement is signed, not after a review.