Transfer Pricing and Financial Transactions

Amanda Pletz/Diana Kabir/Bernardo Danesi

S. 551. Setting the scene

Issues relating to the application of transfer pricing to financing transactions within multinational groups have been presented before the courts undoubtedly due to the importance that financing plays within the multinational enterprises’ value creation process. One such case is the Chevron Australia case that was brought to the Australian federal courts in 2015 for which a credit facility in the equivalent of USD 2.5 billion from a related United States (US) company was contested. This is just one of many examples heard across various jurisdictions.

Such court cases stress the complexities that arise when considering financial transactions, especially in regard to measuring the risk associated with the underlying transactions, the relevant use of data, and intricacies in method applications. Arguably, such cases demonstrate the need to have guidance that is more detailed. Consequently, both the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN) have now done so.

In February 2020, the OECD released the final Transfer Pricing Guidance on Financial Transactions in response to additional...