On 3 July 2018, the OECD released their BEPS discussion draft on the transfer pricing aspects of financial transactions. The paper focuses on the accurate delineation of financial transactions under Chapter I of the OECD Guidelines. The paper also targets specific issues related to the pricing of financial transactions such as treasury function, intra-group loans, cash pooling, hedging, guarantees and captive insurance. Details as to what is covered in each chapter is provided below, along with a link to the paper.
- Interaction of guidance in Section D1 of Chapter 1 of the OECD Guidelines (in particular risks associated with a transaction and accurate delineation) in the context of funding
- Treasury functions - covering intra-group loans (and their underlying terms / the relevance of those terms), cash pooling (structures, pricing and delineation) and hedging
- Guarantees - covering specifically financial guarantees (definition of explicit / implicit / cross guarantees, the pricing of guarantees and examples)
- Captive insurance - covering the rationale for captive arrangements, fronting arrangements, determining the appropriate pricing for premiums / return on capital / factoring in synergies and agency sales
Here is the link to the paper.