New OECD Guidance on Transfer Pricing of Financial Transactions

The first part of the two-part article discusses the importance of the final transfer pricing guidance on financial transactions, the role of accurate delineation as regards financial transactions, the application of the arm’s-length principle to determine if a financial instrument qualifies as debt or equity, and treasury functions and the relevant considerations required when applying the arm’s-length principle to intra-group loans.

In the second part, the authors discuss the new transfer pricing guidance on financial transactions as it applies to cash pooling, hedging, financial guarantees, and captive insurance, which are all part of new Chapter X, and the new guidance on risk free rates of return and risk-adjusted rates of return that will be included in section D.1.2.1 called Analysis of risks in commercial or financial relations in Chapter I.

These articles were originally published on 25 and 26 February 2020 in Bloomberg Tax, who have agreed to them being made available on this website.