Transfer pricing for financial transactions: what just changed?

The OECD has issued new guidance on transfer pricing for financial transactions. The guidance clarifies the process of accurate delineation for financial transactions, which is expected to have a significant impact on the practice of pricing financial transactions. This process is both far more detailed and far broader than previously, as a result of which current transfer pricing studies supporting the pricing of intra-group financial transactions may very well not withstand tax audit scrutiny. A number of aspects must be considered when pricing intra-group loans and intra-group financial guarantees, as well as the circumstances in which intra-group debt may be recharacterised as equity through application of the arm’s length principle.