Intragroup financing & Transfer Pricing

In February 2020, the OECD published Transfer pricing guidance on financial transactions. It covered specific issues related to the pricing of intragroup financing (e.g. intragroup loans, cash pooling, hedging, guarantees).

Addressing base erosion and profit shifting continues to be a key priority for governments around the globe. As a result, local tax authorities have strengthened their provisions on these transactions.

The analysis of intragroup financing must consider the main characteristics of an agreement (e.g. credit rating of the borrower, maturity, ranking subordination, currency). As the practice has been introduced recently, the analysis carried out to determine the intragroup remuneration may be challenged by local tax authorities, which can lead to judgements from local courts.