Guidance published on how to correctly price your intercompany financial transactions
On 11 February 2020 the Organisation for Economic Cooperation and Development, OECD for short, published important guidance on the transfer pricing aspects of financial transactions which is going to be included in the OECD’s transfer pricing guidelines. The OECD transfer pricing guidelines are internationally accepted as the leading guidance on how to determine the pricing of intra-group transactions and are used by many countries across the world to avoid profit shifting to low(er) taxed countries.
This new guidance is important, because the OECD transfer pricing guidelines never included specific guidance on the transfer pricing aspects of financial transactions. The types of financial transactions included in the new guidance are: intra-group loans, cash pools, hedging transactions, financial guarantees, and captive insurance.
It is expected that this new guidance will contribute to a more consistent application of the transfer pricing rules between countries to avoid double taxation or tax disputes. On the other hand this guidance may also trigger and empower tax authorities to increase their focus on intra-group financial transactions and companies may do well to ensure that their intra-group financial transactions are in accordance with this new guidance.
If you want to know more about this new guidance or how you can prepare yourself for these new rules, feel free to reach out to our transfer pricing experts.