Recent developments have increased the need for robust transfer pricing analysis and documentation
Chapter X of the 2022 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD Guidelines”) and the Dutch Transfer Pricing Decree 2022 contain extensive guidance for financial transactions. Before the update in 2022, the OECD Guidelines contained little to no guidance on financial transactions. The new OECD guidance has also triggered tax authorities around the globe to increasingly scrutinize financial transactions. Local transfer pricing guidance/ regulations, such as in the Netherlands and Germany, may also deviate to some extent from OECD guidance, which may create further complications. In addition, local transfer pricing case law for financial transactions is ever increasing (including the Dutch ‘onzakelijke lening’ or ‘unbusinesslike loan’ case law), which also is a relevant factor to consider.
Therefore, now, more than ever, it is important that multinationals maintain a robust approach to the arm’s length pricing of:
- Intercompany loans/ receivables
- Thin capitalization and debt capacity
- Participation in cash pools, including the pricing of balances and benefit allocation
- Intercompany financial and performance guarantees
- Captive insurance arrangements
- Hedging, factoring, credit default swaps and other specialized financial transactions
How can we help with financial transactions transfer pricing?
Our financial transactions transfer pricing specialists have leading expertise in this area and are able to assist with:
- Setting up and structuring intercompany financial arrangements to assist with liquidity and other business objectives, while minimizing tax risk;
- Perform diagnostics on organization’s existing intra-group financial transactions, in light of the new OECD and local Guidance/ case law;
- Design and help implement practical transfer pricing policies and operating procedures for financial transactions, including intercompany agreements;
- Assist with designing transfer pricing policies for central treasury operations/ inhouse banks, whilst assisting with practical advice on practical implementation;
- Design internal governance framework for treasury teams to follow to help simplify processes associated with pricing intra-group financing arrangements, whilst aligning tax and treasury objectives;
- Prepare robust transfer pricing documentation, which evidences and documents the arm’s length nature of the intercompany financial transactions;
- Help MNEs navigate the tax controversy landscape if disputes arise in relation to intercompany financial transactions
Our Financial Transactions team has significant experience with the above, including dealing with the Dutch tax authorities.
We are also able to help resolve disputes related to financial transactions transfer pricing or as part of an APA/MAP process, together with our Team of Tax Controversy specialists. Through our access to the global KPMG network, we can provide assistance with local Financial Transaction issues worldwide.
