Planning for a Successful Transition of Intercompany Libor Positions

With the sunsetting of the London Inter-bank Offered Rate (Libor) on the horizon, multinational companies should assess potential exposure points and develop a transition strategy to identify and replace references and dependencies, including with respect to intercompany positions. In almost all cases, barring certain safe harbors, the arm’s-length standard must be applied when setting prices for intercompany loans, and the switch away from Libor (whether terminating or updating existing arrangements) is no exception. This switch should seek to mirror market behavior; otherwise, companies will potentially face tax risk and exposure. The transition away from Libor may also present opportunities to identify and implement relatively more tax-efficient solutions, so long as they do not deviate from the arm’s-length standard.

In this Bloomberg Tax article, Stefanie Perrella, Jennifer Press and David Ptashne outline how multinational companies should assess potential exposure points and develop a transition strategy to identify and replace references and dependencies.

Read more here.