The latest trend when it comes to inbound interest free loans into an entity in Africa from either a local or an offshore group company, is that numerous Tax Authorities across Africa are imputing an interest amount into the hands of the group company who is the borrower with a view to raising the withholding tax on the interest. Their argument is that in a normal arm’s length scenario, money would never be advanced at a zero rate of interest.
And as such the Revenue Authorities make these transfer pricing adjustments in accordance with domestic transfer pricing legislation in that country.