JJurical
Transfer pricing3 credits

Guarantee fee under the yield approach (OECD §10.160–10.168)

Determine what a group company should pay for an intra-group guarantee: the borrower’s credit margin without the guarantee minus the margin at the guarantor’s rating, with the expected-loss cross-check as a binding floor — and a certified, reproducible report with the full methodology.

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guarantee-fee v1.0.0 · vintage 2026.1 · draft free
Example outcome
Guarantee fee (yield differential leading)0.0410%
Margin without guarantee — borrower Baa11.5059%
Margin with guarantee — guarantor rating Aa31.4649%
Yield differential vs. annualised expected-loss floor (§10.168)0.0410% / 0.0400%
sha256 a3f19c47e8b2d05f6c91a4e7d23b8f50…

Who it’s for

01Transfer pricing specialists who must price a parent or group guarantee and want to justify the choice of method.
02Tax advisers charging on intra-group guarantees in an acquisition or refinancing structure.
03CFOs and group treasurers who secured a bank facility on the parent’s strength and must set the fee at arm’s length.

What the tool does

✓ Yield approach: the borrower’s margin without guarantee minus the margin at the guarantor’s standalone rating✓ Synthetic rating of the borrower from its key financials, including leverage notching✓ Both margins fully decomposed: expected loss, regulatory, market and operational risk✓ Expected-loss cross-check as a binding floor (OECD §10.168): borrower EDF minus guarantor EDF, times loss given default✓ Guarantor country (risk-free rate, ERP, tax) and borrower country (country risk premium) set separately✓ Terms of 1–10 years, transaction years 2021–2026, certified PDF with verification hash and the dataset vintages used
01 — Form
Case and key figures — a handful of fields.
02 — Draft
Full outcome layout, free.
03 — Pay and receive
Via Mollie, VAT/VIES handled.
04 — Report
Certified PDF + public hash.

Why a guarantee fee can rarely be set by feel

Chapter X of the OECD guidelines treats an explicit group guarantee as a service with a price: the borrower pays for the funding benefit the guarantee provides, not for the implicit support it already enjoys as a group member. That distinction almost always turns the discussion with the inspector into a calculation.

This tool computes that benefit as the difference between two margins for the same borrower — with and without the guarantee — and places an expected-loss cross-check beside it. The report shows both margins, the intermediate steps, the tool version and the dataset vintage, with a hash anyone can verify publicly.

Frequently asked questions about this tool

What data do I need?
The guaranteed principal, the term (1–10 years) and the transaction year (2021–2026), the borrower’s key financials (EBIT, EBITDA, interest expenses, equity and total liabilities), the industry, the guarantor’s and the borrower’s country, and the guarantor’s standalone rating. The tool prices margins only — there is no risk-free leg and therefore no currency input.
What role does the guarantor’s rating play?
A central one. Under a full parent guarantee, the guarantor’s creditworthiness is the lender’s actual credit exposure: the “with guarantee” margin is therefore priced at the guarantor’s standalone rating (twenty ratings, Aaa through Ca), senior unsecured. The same rating also feeds the expected-loss cross-check. A notch on the borrower’s own rating would price collateral security, not a parent guarantee — the report explains this methodological choice.
Can the outcome be zero?
Yes. If the guarantor has the same or a lower rating than the borrower, both the yield differential and the net expected-loss cross-check are zero and nothing is payable. If the differential is above zero but below the expected-loss floor — the cumulative expected loss divided by the term, so per annum — that floor is binding (OECD §10.168). The report flags this explicitly and shows both components.
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Guarantee fee under the yield approach (OECD §10.160–10.168) — Jurical