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Vol 21 No 9 Sept/Oct 2016

Book of the Month

Cover of Goode on Commercial Law

Goode on Commercial Law

Edited by: Ewan McKendrick
Price: £170.00

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Transfer Pricing Aspects of Intra Group Financing

ISBN13: 9789041167323
Published: July 2016
Publisher: Kluwer Law International
Country of Publication: The Netherlands
Format: Hardback
Price: £108.00

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For corporate managers, maximization of the profits and the market value of the firm is a prime objective. The logical working out of this principle in multinational enterprises has led to an intense focus on transfer pricing between related companies, principally on account of the very attractive tax advantages made possible.

Inevitably, numerous countries have established transfer pricing legislation designed to combat the distortions and manipulations that are inherent in such transactions. This important book, one of the first in-depth analysis of the current worldwide working of transfer pricing in intra-group financing and its resonance in law, presents the relevant issues related to loans, financial guarantees, and cash pooling; analyses an innovative possible approach to these issues; and describes new methodologies that can be implemented in practice in order to make intra-group financing more compliant with efficient corporate financing decisions and the generally accepted OECD arm’s length principle.

Comparing the tax measures implemented in the corporate tax law systems of forty countries, this study investigates such aspects of intra-group financing as the following:-

  • corporate finance theories, studies, and surveys regarding financing decisions;
  • application of the arm’s length principle to limit the deductibility of interest expenses;
  • impact of the OECD’s Base Erosion and Profit Shifting (BEPS) project;
  • transfer pricing issues related to intra-group financing;
  • credit risk in corporate finance;
  • rationales utilized by credit rating agencies; and
  • the assessment of arm’s length nature of intra-group financing.

The author describes ways in which the application of the arm’s length principle can be strengthened and how the related risk of distortion and manipulation can be minimized. The solutions and methodologies proposed are applicable to any business sector.

Given that determination of the arm’s length nature of transactions between related companies is one of the most difficult tasks currently faced by taxpayers and tax administrations around the world, this thorough assessment and analysis will prove extraordinarily useful for in-house and advisory practitioners, corporate officers, academics, international organizations, and government officials charged with finding effective responses to the serious issues raised.

In addition to its well-researched analysis, the book’s comparative overview of how loans, financial guarantees, and cash pooling are currently addressed by OECD Member States and by their national courts is of great practical value in business decision making.

Chapter 1 Corporate Financing Decisions and Related Tax Issues
Chapter 2 Transfer Pricing Issues Related to Intra-Group Financing
Chapter 3 Assessing the Arm’s Length Nature of Intra-Group Financing: A New Approach

APPENDIX I Debt Ratios (Median Values) of European Non-Financial Corporations in 2013
APPENDIX II Debt Ratios (Interquartile Values) of BB Rated European Non-Financial Corporations in 2013