It is suggested that the concept of normal trade practice could be generally adopted as regards delays in making settlements. If under given circumstances, an unrelated party would not have charged interest on balances outstanding, an associated enterprise need not be required to charge interest either. Similarly, an associated borrower would not be regarded as paying interest if, in regular trade practice, no interest would have been paid. In looking at particular transactions it has to be borne in mind, however, that prices for goods or services may contain an implicit interest element. If an implicit element of interest is recognised and this is at an arm’s length rate, there would be no grounds for requiring additional interest. Due to different trade practices in the countries concerned, the possibility cannot be overlooked that two tax administrations may reach different conclusions when looking at the same transaction from two different angles although acceptance of the general arm’s length approach should make it possible to avoid extreme cases of divergent interpretation ...

In most countries, and in most trades, there are likely to be established norms of practice with regard to interest charges on trade credits. The existence of such norms provides in each case a point of reference for trade credits between associated enterprises. Where the tax authorities do have more precise rules, it is desirable that these rules should approximately represent a codification of business practices ...