(Principal. at Magliari and Associates) | Aug 27, 2013
I am working for a privately held company that has recently acquired a couple of subsidiaries internationally.
We currently need to provide an intercompany loans to two of the subs (located in Germany and Taiwan). The subs are wholly owned by the parent.
In loaning the funds intercompany ("parent-to-sub" or "sub-to-parent"), is it absolutely necessary to charge interest on the loans - or for simplicity, can we loan funds back-and-forth without charging interest? (while still documenting and recording the intercompany loans in the financials).
We would like to forego the requirement for charging interest expense in order to minimize the internal accounting effort since it is all internal to the corporation.
Can we loan funds without charging interest on the loan?