The Minister of Finance has adopted, based on Article 61, Paragraph 3 of the Corporate Income Tax Law, a new Rulebook on interest rates deemed to be in accordance with the “arm’s length principle” for the year 2024 (“Rulebook“).
The Rulebook prescribes the interest rates considered to be in accordance with the “arm’s length principle,” which are calculated on loans, or credits, between related parties and are applied to the determination of corporate income tax for the year 2024.
Transfer prices represent a financial report describing business transactions between related parties, while the “arm’s length principle” refers to the method of determining transfer prices which requires them to be set as if the business relations were conducted between unrelated parties. This principle is one of the ways to control prices between related parties, carried out by comparing transfer prices with those determined according to the “arm’s length principle,” with the burden of proving the correctness of transfer prices falling on the taxpayer – the related parties.
There is a significant increase in the prescribed interest rates, which have been raised up to twice as much compared to 2023. For example, the interest rate for other companies (except banks and financial leasing providers) on short-term loans in dinars increased from 3.88% in 2023 to 7.57% in 2024, while the interest rate on long-term loans in dinars increased from 4.74% to 8.30%. A similar situation exists for short-term loans in euros (and dinar loans indexed in euros), where the interest rate rose from 2.98% to 6.12%, and from 3.22% to 6.23% for long-term loans in 2024.