Transfer Pricing Aspects of Intra-Group Financing

EUCOTAX Series on European Taxation Volume 47

Transfer Pricing Aspects of Intra-Group Financing provides one of the first in-depth analyses of the current worldwide working of transfer pricing in intra-group financing, and its resonance in law. For corporate managers, maximization of profits and market value of the company are prime objectives. The logical working out of this principle in multinational enterprises has led to an intense focus on transfer pricing between related companies, principally because of the very attractive tax advantages obtainable. Inevitably, numerous countries have established transfer pricing legislation designed to combat the distortions and manipulations that are inherent in such transactions. This book presents solutions to issues that are related to transfer pricing and intra-group financing, by combining an academic and a practical approach.

This important book presents the relevant issues related to loans, financial guarantees, and cash pooling and analyses an innovative possible approach to these issues. The book also describes new methodologies that can be implemented in practice, in order to make intra-group financing more compliant with efficient corporate financing decisions and the generally accepted OECD arm's length principle.

What's in this book:

Comparing tax measures implemented in corporate tax law systems of forty countries, this study investigates aspects such as:

• corporate finance theories, studies, and surveys regarding financing decisions;
• application of the arm's length principle to limit the deductibility of interest expenses;
• impact of the OECD's Base Erosion and Profit Shifting (BEPS) project;
• transfer pricing issues related to intra-group financing;
• credit risk in corporate finance;
• rationales utilized by credit rating agencies; and
• the assessment of arm's length nature of intra-group financing.

The author describes ways in which the application of the arm's length principle can be strengthened, and how the related risk of distortion and manipulation can be minimized. The solutions and methodologies proposed are applicable to any business sector.

How this will help you:

Given that determination of the arm's length nature of transactions between related companies is one of the most difficult tasks currently faced by taxpayers and tax administrations around the world, this thorough assessment and analysis will prove extraordinarily useful for in-house and advisory practitioners, corporate officers, academics, international organizations, and government officials charged with finding effective responses to the serious issues raised. In addition to its well-researched analysis, the book's comparative overview of how loans, financial guarantees, and cash pooling are currently addressed by the OECD Member States and their national courts is of great practical value in corporate decision-making.