On July 3, 2018 the OECD released a Public Consultation Draft on a very important subject, namely the transfer pricing aspects of financial transactions (BEPS Actions 8 - 10). The consultation period runs until September 7, 2018.
The first part of the discussion draft provides guidance on the application of the principles contained in Section D.1 of Chapter I of the Transfer Pricing Guidelines to financial transactions. In particular, Section B.1 of the discussion draft elaborates on how the accurate delineation analysis under Chapter I applies to the capital structure of a multinational enterprise (MNE) within an MNE group. The discussion draft clarifies that the guidance included in this section does not prevent countries from implementing approaches to address capital structure and interest deductibility under their domestic legislation. Section B.2 outlines the economically relevant characteristics that inform the analysis of the terms and conditions of financial transactions.
The second part of the discussion draft, contained in sections C, D and E, addresses specific issues related to the pricing of financial transactions such as treasury function, intra-group loans, cash pooling, hedging, guarantees and captive insurance.
The discussion draft also includes a number of questions to commentators on which inputs from stakeholders will be particularly relevant to (Working Party No. 6) WP6 to further its work and prepare another discussion draft after considering the input received.
Click here to be forwarded to the Public Consultation Draft “BEPS ACTIONS 8 - 10 - Financial transactions” as released by the OECD on July 3, 2018.
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