United Nations Issues Draft Guidance On Financial Transactions, Profit Splits And Risk Assessment

On April 8, 2019, the UN Committee of Experts on International Cooperation in Tax Matters (the "Committee") issued draft updates to the existing Practical Manual on Transfer Pricing for Developing Countries (the "Manual"), which included a new chapter on Financial Transactions and revised texts on Profit Splits as well as Establishing Transfer Pricing Capability, Risk Assessment and Transfer Pricing Audits. This release coincided with the 18th session of the Committee held at the UN headquarters on April 23-26, 2019.

The proposed new Chapter B on Financial Transactions is largely a discussion document reflecting the current thinking of the Subcommittee Article 9 (Associated Enterprises): Transfer Pricing with respect to this topic. It opens with a discussion on the importance of intra-group financing transactions within multinational groups and how these transactions may lead to base erosion. Thereafter, the chapter focuses primarily on loans and guarantees for