News / Alert – OECD report on financial transactions
The OECD has recently published (February 2020) the much-awaited report “Transfer Pricing Guidance on Financial Transactions”.
For the first time the OECD guidance describes matters applicable to the transfer pricing aspects of financial transactions. The information contained in the new guidance covers the application of the arm’s length principle to financial transactions between related parties, as well as practical issues connected with valuation of transactions such as loans, cash pooling, hedging, and guarantees. The discussed issues are illustrated with numerous examples.
The guidance on financial transactions may be used by tax administrations of OECD member countries for re-characterization of transactions (e.g. re-characterization of intra-group loans, especially in terms of assessing the likelihood of loan repayments) and for challenging costs of interest on such loans. The key issues discussed in the guidance are:
We recommend that you verify the impact of the new guidance on your specific situation (including on the contracts executed, transaction conditions, etc.). Please contact us if you have any questions.