What intercompany interest rate should I charge on a loan to my Israeli subsidiary?

For cross-border foreign-currency intercompany loans, the arm's length rate must reflect the borrower's credit risk and market conditions. Rashut HaMisim routinely scrutinizes interest rates below SOFR or EURIBOR plus an appropriate credit spread for the borrower. There is no safe-harbor rate for foreign-currency cross-border loans under Israeli law; the arm's length rate must be established by reference to comparable bank lending rates or bond yields for borrowers with a similar credit profile. A zero-interest or below-market loan typically triggers a deemed interest adjustment under Section 85A and the 2006 Transfer Pricing Regulations. For more detail, see Transfer Pricing in Israel: A Guide for Foreign Multinationals.