The Classification of Intra-Group Loans: Debt versus Equity under the OECD Guidelines

This article examines the classification of intra-group loans as debt or equity under the OECD Transfer Pricing Guidelines. It argues that this qualification is determined not by contractual form but through the accurate delineation of the actual transaction, in which the nine economically relevant characteristics identified in paragraph 10.12 of the Guidelines (the Debt Indicators) play a central role. Drawing on chapter X, relevant international case law and practical experience, the article analyses each Debt Indicator in turn and highlights areas of interpretative uncertainty, including the extent to which intra-group monitoring can substitute for formal covenants and the relationship between partial recharacterization under chapter X and the high threshold for non-recognition under chapter I. It concludes by setting out the evidentiary and documentation expectations, in particular the importance of a robust ex ante debt capacity analysis.