The Organisation for Economic Co-operation and Development (OECD) has released transfer pricing guidance on financial transactions, developed as part of Actions 4, 8-10 of the base erosion and profit shifting (BEPS) Action Plan.
The report, released on 11 February, was described by the OECD as “significant” after transfer pricing guidelines were included for the first time in the guidance on the transfer pricing aspects of financial transactions.
The OECD explained that the release of the report will contribute to consistency in the interpretation of the arm’s length principle and help avoid transfer pricing disputes and double taxation.
In the report, the guidance describes the transfer pricing aspects of financial transactions and includes a number of examples to illustrate the principles discussed.
Under these mandates, the committee on fiscal affairs produced a non-consensus discussion draft on financial transactions in July 2018.
The discussion draft aimed to clarify the application of the principles included in the 2017 edition of the OECD Transfer Pricing Guidelines, specifically the accurate delineation analysis under Chapter I, to financial transactions.
It also provided guidance with specific issues relating to the pricing of loans, cash pooling, financial guarantees, and captive insurance.
According to the OECD, the guidance contained in this report takes account of comments received in response to the public discussion draft.
