IBF Masterclass - Transfer Pricing – application and impact on financial transactions

IBF Masterclass - Transfer Pricing – application and impact on financial transactions

16 Jul 2020

The last decade was defined by a range of international tax and transfer pricing developments which came about due to the Base Erosion and Profit Shifting ("BEPS") Action Plans.  Although the BEPS Action Plans were finalised in 2016, a key aspect – on financial transactions - was largely left untouched.  In February 2020, the guidance on financial transactions was finally released by the OECD.  Such guidance was consistent with both Action Plan 4 (Limiting Base Erosion involving Interest Deductions and Other Financial Payments) as well as the broader Transfer Pricing Guidelines. 

The OECD's Guidance on Financial Transactions is timely given the current economic situation that has come about due to COVID-19.  While the guidance provides specific considerations for intercompany lending, it also expands on the role and analysis of the treasury functions by looking at transactions involving hedging, cash pooling and financial guarantees.  Furthermore, it also provides detailed guidance on how arm's length pricing for captive insurance and re-insurance should be undertaken. 

This is a significant step by the OECD towards providing an all-inclusive guidance on financial transactions, and clearly signifies that the OECD expects to see marked progress by multinationals, including financial institutions, in updating their existing transfer pricing policies on financial transactions to comply with the revised Transfer Pricing Guidelines.  Such guidance is also likely to provide the necessary framework for tax authorities to review their related party financial transactions.

To find more,please visit : https://www.ibf.org.sg/event/Pages/EventDetail.aspx?eventid=216