Menu
  • Locations
  • About Us
  • Services
  • Experts
  • News & Knowledge
  • Hot Topics
  • Culture & Career
  • Locations
  • Search
  • Press
  • Events & Webinars
  • CI Guide
  • Contact
  • Albania
  • Angola
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Bangladesh
  • Belarus
  • Belgium
  • Benin
  • Bolivia
  • Bosnia & Herzegovina
  • Brazil
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Guatemala
  • Guinea
  • Honduras
  • Hong Kong
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iran
  • Iraq
  • Ireland
  • Israel
  • Italy
  • Ivory Coast
  • Japan
  • Kazakhstan
  • Kenya
  • Korea
  • Kyrgyzstan
  • Laos
  • Latvia
  • Lithuania
  • Luxembourg
  • Macao
  • Macedonia
  • Madagascar
  • Malaysia
  • Mali
  • Malta
  • Mauritius
  • Mexico
  • Moldova
  • Mongolia
  • Montenegro
  • Morocco
  • Mozambique
  • Myanmar
  • Nepal
  • Netherlands
  • New Zealand
  • Niger
  • Nigeria
  • Norway
  • Pakistan
  • Panama
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Romania
  • Russia
  • Rwanda
  • Saudi Arabia
  • Senegal
  • Serbia
  • Seychelles
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Tanzania
  • Thailand
  • Togo
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • Uruguay
  • USA
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Zambia
  • About Us
  • Our CEO
  • Our Board
  • Our Global Executive Team
  • Quality, Process & Risk Management
  • Corporate Tax
  • Customs
  • Financial Services
  • Global Mobility
  • Indirect Tax
  • International Corporate Tax
  • Mergers & Acquisitions (M&A)
  • Private Clients & Family Office
  • Sustainability & ESG in Taxation
  • Tax Controversy
  • Tax Technology
  • Transfer Pricing & Valuation
  • Real Estate
  • Digital Tax Law
  • European Tax Law
  • Latest News
  • Brochures
  • Newsletters
  • Newsletter Subscription
  • Surveys & Studies
  • Pillar Two - Global Minimum Tax
  • Pillar Two - Implementation Status Worldwide
  • Climate Protection, Green Tax & Energy
  • Sustainability & ESG in Taxation
  • Culture and Leadership
  • Diversity
  • WTS Global Academy
  • Career
  • Your Development
  • Jobs
  • Pillar Two Team
  • Pillar Two - Implementation Status Wordwide
  • Press
  • Events & Webinars
  • CI Guide
  • Contact
WTS worldwide
  • Albania
  • Angola
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Bangladesh
  • Belarus
  • Belgium
  • Benin
  • Bolivia
  • Bosnia & Herzegovina
  • Brazil
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Guatemala
  • Guinea
  • Honduras
  • Hong Kong
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iran
  • Iraq
  • Ireland
  • Israel
  • Italy
  • Ivory Coast
  • Japan
  • Kazakhstan
  • Kenya
  • Korea
  • Kyrgyzstan
  • Laos
  • Latvia
  • Lithuania
  • Luxembourg
  • Macao
  • Macedonia
  • Madagascar
  • Malaysia
  • Mali
  • Malta
  • Mauritius
  • Mexico
  • Moldova
  • Mongolia
  • Montenegro
  • Morocco
  • Mozambique
  • Myanmar
  • Nepal
  • Netherlands
  • New Zealand
  • Niger
  • Nigeria
  • Norway
  • Pakistan
  • Panama
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Romania
  • Russia
  • Rwanda
  • Saudi Arabia
  • Senegal
  • Serbia
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Tanzania
  • Thailand
  • Togo
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • Uruguay
  • USA
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Zambia
  • About Us
    About Us

    Here you will find more information on our organization’s structure, experts and global reach.

    Read more
    About Us Our CEO Our Board Our Global Executive Team Quality, Process & Risk Management
  • Services
    Services

    Learn more about our network partners and their services.

    Read more
    Corporate Tax Customs Financial Services Global Mobility Indirect Tax
    International Corporate Tax Mergers & Acquisitions (M&A) Private Clients & Family Office Sustainability & ESG in Taxation Tax Controversy
    Tax Technology Transfer Pricing & Valuation Real Estate Digital Tax Law European Tax Law
  • Experts
    Experts

    With a representation in over 100 countries, our team offers local expertise on a global scale. Learn more about our experts.

    Read more
  • News & Knowledge
    News & Knowledge

    Welcome to WTS Global Insights. Here you will find news and updates from our worldwide network.

    Read more
    Latest News Brochures Newsletters Newsletter Subscription Surveys & Studies
  • Hot Topics
    Hot Topics

    Overview of the current "Hot Topics" in the tax industry and how we can support with individual questions.

    Read more
    Pillar Two - Global Minimum Tax Pillar Two - Implementation Status Worldwide Climate Protection, Green Tax & Energy Sustainability & ESG in Taxation
  • Culture & Career
    Culture & Career
    Read more
    Culture and Leadership Diversity WTS Global Academy Career Your Development
    Jobs
  • Locations
    Locations

    Learn more about our worldwide partner network.

    Read more
  • Search
26.11.2018

WTS Global Comments to the OECD Discussion Draft on Financial Transactions

The discussion draft does not present a consensus of the OECD

On July 3, 2018, the OECD published a 43-page discussion draft on cross-border financial transactions. The OECD Transfer Pricing Guidelines (TPG) as well as most national regulations currently only contain rudimentary guidance on the subject of intra-group financing, meaning the discussion draft has been awaited with great interest. The publication of the discussion draft was announced about two years ago, but was postponed several times due to inconsistencies among the OECD member states. For this reason, it is not surprising that the discussion draft does not present a consensus of the OECD, but rather an overview of concepts regarding financial transactions.

78 interested parties, including T/A Economics and WTS Germany, as part of WTS Global, submitted comments to the OECD Discussion Draft1 . The following provides an overview of the most fundamental issues raised by T/A Economics and WTS Germany:

  • We have urged that any further draft in relation to transfer pricing considerations for financial transactions (i) should primarily safeguard the arm’s length principle as the sole standard for assessing the conditions of the controlled transaction and thus not make any reference or give any consideration to non-economic taxation measures such as interest deduction limitations (BEPS action 4) and (ii) maximize measures to resolve double taxation issues (e.g. article 25 of the mutual tax convention).
  • In particular, in our view, the discussion draft may be interpreted in such a way that it sets certain standard presumptions that could be considered to contradict the arm’s length principle, such as:
    • The (rebuttable) presumption that all subsidiaries within an MNE group should be attributed the same level of creditworthiness as the group as a whole;
    • The presumption that group treasury activities, and more particularly as a cash pool leader, would generally constitute a mere service provider not incurring any of the risks attached to the cash pool;
    • The presumption that to qualify as a captive insurance entity entitled to file an insurance-related return, all (or substantially all) features of an independent insurer should be met, which in our observation feels like an “all-or-nothing” approach to transaction delineation; and
    • The presumption that if a guarantee does not lead to a credit enhancement beyond the implicit group support for the borrower, the guarantee is presumed to provide access to more financing and thus, according to the discussion draft, the loan should be re-characterized as a loan to the guarantor followed by an equity contribution from the guarantor in relation to the original borrower.

Accordingly, we have suggested that the next versions of the discussion draft should touch upon these points.

  • It should be appreciated that the freedom to finance is broad and that the rationale for capital structures within the boundaries provided by the market economy is very case-specific. Therefore, when taxpayers carefully substantiate their rationale for particular capital structures, taxpayers should be able to rely on any (sound) economic argument. Tax administrations should bear the burden of proof of whether such rationale would be abusive as a precondition for the requalification of debt to equity and vice versa.
  • Whilst actual conduct in respect of financial transactions should obviously also be assessed, it should be recognized that contractual reality is not only a starting point for financial assets, it is, relatively speaking, the most important comparability factor in accurately delineating the controlled transaction.
  • In our view, the discussion on the risk-free rate and risk-adjusted return does not specifically belong to the scope of financial transactions and should not be used as a single measure of return, certainly not for the purposes proposed – i.e., returns in the event of lack of control over certain assets.

Our complete set of comments can be accessed at the following link. 

1 The discussion draft can be accessed at the following link: http://www.oecd.org/tax/transfer-pricing/oecd-releases-beps-discussion-draft-on-the-transfer-pricing-aspects-of-financial-transactions.htm

Andy Neuteleers
Partner Transfer Pricing Belgium & Luxembourg
Belgium
Melanie Appuhn-Schneider
Director
WTS Global Transfer Pricing GSL Co-Head
Germany
Article published in TP Newsletter #2/2018
Transfer Pricing Newsletter: Update on the recent news and cases
View publication
Newsletter Transfer Pricing

With this newsletter, we inform multinational companies on country-specific and international legislative documents and regulations.

Subscribe now
Articles you might be interested in

With the Polish implementation of the "SUP Directive" entering into force, businesses will now face new compliance duties aimed at reducing the environmental impact of certain plastic products.

Poland: The Polish implementation of the "SUP Directive" enters into force
Read more

The Supreme Court declares the existence of discrimination in the taxation of non-resident hedge funds when receiving dividends from Spanish companies

Spain: WHT on dividends obtained by a non-resident AIF
Read more

As a result of the new amendments in Portugal, the contribution on single use packaging made of aluminium (or a multi-material containing aluminium) will apply from 1 September 2023.

Plastic Taxation in Portugal
Read more

Get in contact

If you have any questions about WTS Global or our global services, please get in touch.
We will respond to you as soon as possible.

Contact
About Us
  • About Us
  • Our CEO
  • Our Board
  • Our Global Executive Team
  • Quality, Process & Risk Management
Services
  • Corporate Tax
  • Customs
  • Financial Services
  • Global Mobility
  • Indirect Tax
  • International Corporate Tax
  • Mergers & Acquisitions (M&A)
  • Private Clients & Family Office
  • Sustainability & ESG in Taxation
  • Tax Controversy
  • Tax Technology
  • Transfer Pricing & Valuation
Latest News
  • News & Knowledge
  • Brochures
  • Newsletters
  • Newsletter Subscription
  • Surveys & Studies
Hot Topics
  • Pillar Two - Global Minimum Tax
  • Digital Tax Law
  • European Tax Law
  • Climate Protection, Green Tax & Energy
  • Sustainability & ESG in Taxation
Culture & Career
  • Culture and Leadership
  • Diversity
  • WTS Global Academy
  • Career
  • Your Development
  • Jobs
Exclusive Cooperation With
© 2023 WTS Company Information Data Protection Disclaimer