In brief
On 11 February 2020, the OECD issued the long-awaited final
version of the Financial Transactions paper (first issued as a
non-consensus document in July 2018). The document evaluates the
following issues:
- Delineating the transaction
- Intra-group lending
- Cash pooling
- Hedging
- Guarantees
- Captive insurance
In detail
Impact The paper is the first to be issued by the OECD which
reflects a consensus position with respect to the treatment and
pricing of intercompany financial transactions. As such, companies
need to assess the new guidelines (which will form Chapter X of the
OECD Transfer Pricing Guidelines) against their existing group
intercompany financing policy. Areas which are likely to be of
greatest interest and impact include the application of implicit
support, credit rating methodologies (tools and application),
reconciliation against cost of external borrowing, application of
the most appropriate terms and conditions for
