The noticeable decline in interest rates in recent months creates a genuine opportunity to refinance commercial loans and reduce financing costs. This naturally raises the question: should related parties also take advantage of improved market conditions? Loans concluded during the post‑pandemic period of elevated interest rates are now facing entirely different economic circumstances.

According to transfer pricing regulations: “A comparability analysis and a compliance analysis must be updated at least every three years, unless a change in the economic environment significantly affecting the analysis justifies an update in the year the change occurred.”

The observed decline in interest rates, combined with the above-cited provision, raises the issue of whether the interest rates applied in related‑party loans — especially those concluded between 2022 and 2024 — continue to reflect the arm’s length principle.

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3M WIBOR changes in 2024–2026

Prepared in‑house based on data from https://www.bloomberg.com/professional/solution/bloomberg-terminal/

3M EURIBOR changes in 2024–2026

Prepared in‑house based on data from https://www.bloomberg.com/professional/solution/bloomberg-terminal/

Changing Market Conditions

When interest rates surged in response to inflation after a period of record lows during the pandemic, the increase in the market cost of money generally did not prompt borrowers to renegotiate intragroup financing agreements. This was due to the asymmetry of rights between lenders and borrowers. A decline in interest rates, however, may lead to a different situation — the borrower may potentially (though not always realistically) refinance at a lower cost on the market. Naturally, it was not in borrowers’ interest to refinance at a higher cost than the financing obtained in 2019–2021; most therefore continued to repay their loans under the existing terms.

It is worth noting that certain individual tax rulings take a highly literal approach to the requirement to update remuneration based on a three‑year benchmark refresh, even in the factual circumstances described above. Although such interpretations conflict with market practice — and, arguably, with economic logic — they demonstrate the strength of the statutory wording concerning the need to update comparability analyses.

The current cycle of interest rate cuts affects financial market conditions in a different way. A lower cost of capital increases the availability of alternative, cheaper financing sources, potentially strengthening the borrower’s negotiating position. In such circumstances, a rational market participant should assess whether more competitive market offers are available. Naturally, such an assessment should also take into account other factors related to potential refinancing, such as additional costs associated with the transaction.

In the context of intragroup financing, the implications are similar: a significant change in economic conditions may affect the arm’s length nature of the applied interest rates. It therefore becomes necessary to assess whether the current interest rate still reflects prevailing market conditions and the parties’ risk profile. If the analysis indicates a material departure from market levels, an update of the financing terms may be justified.

Maximum Interest Rates in Loan Agreements

It is also important to consider the statutory rules on maximum interest rates. Under Article 359 of the Polish Civil Code, statutory interest is defined as the NBP reference rate plus 3.5 percentage points, while maximum interest equals twice the statutory rate. In practice, this means that the ceiling for permissible interest rates moves in line with the Monetary Policy Council’s decisions on the reference rate. While the reference rate remained elevated in previous years, its reduction in the second half of 2025 — ultimately to 4.00% as of 4 December 2025 — materially lowered the maximum permissible interest rate (currently 15%). Forecasts of further rate cuts suggest that entities applying interest rates close to the statutory limit should assess not only the arm’s length nature of their pricing but also its compliance with civil law.

Conclusions

The recent significant reductions in interest rates justify a renewed evaluation of intragroup loan pricing to confirm that it remains arm’s length, while also ensuring alignment with the parties’ risk profiles and the non‑interest terms of the financing.

If you are interested in support with arm’s length assessments or with reviewing the compliance of your interest rates with applicable regulations, we encourage you to contact us.