OECD – BEPS ACTIONS 8 – 10. Financial transactions. 3 July- 7 September 2018: Under the mandate of the Report on Actions 8-10 of the BEPS Action Plan (“Aligning Transfer Pricing Outcomes with Value Creation”), Working Party No. 6 (“WP6”) has produced a non-consensus discussion draft on financial transactions. The first part of the discussion draft provides guidance on the application of the principles contained in Section D.1 of Chapter I of the Transfer Pricing Guidelines to financial transactions. In particular, Section B.1 of the discussion draft elaborates on how the accurate delineation analysis under Chapter I applies to the capital structure of an MNE within an MNE group. The discussion draft clarifies that the guidance included in this section does not prevent countries from implementing approaches to address capital structure and interest deductibility under their domestic legislation. Section B.2 outlines the economically relevant characteristics that inform the analysis of the terms and conditions of financial transactions. The second part of the discussion draft, contained in sections C, D and E, addresses specific issues related to the pricing of financial transactions such as treasury function, intra-group loans, cash pooling, hedging, guarantees and captive insurance. The discussion draft also includes a number of questions to commentators on which inputs from stakeholders will be particularly relevant to WP6 to further its work and prepare another discussion draft after considering the input received. Interested parties are invited to send their comments on this discussion draft, and to respond to the specific questions included in the boxes, by 7 September 2018 by email to TransferPricing@oecd.org in Word format (in order to facilitate their distribution to government officials). Comments in excess of ten pages should attach an executive summary limited to two pages. Comments should be addressed to the Tax Treaties, Transfer Pricing and Financial Transactions Division, OECD/CTPA. Please note that all comments received on this discussion draft will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting. The proposals included in this discussion draft do not, at this stage, represent the consensus views of the CFA or its subsidiary bodies but are intended to provide stakeholders with substantive proposals for analysis and comment. Introduction. 1. The purpose of the following sections is to provide guidance for determining whether the conditions of certain financial transactions between associated enterprises are consistent with the arm’s length principle. 2. Section B describes the application of the principles of Section D.1 of Chapter I to financial transactions. Section C provides guidance on determining the arm’s length conditions for treasury activities, including intra-group loans, cash pooling and hedging. Section D examines financial guarantees, and section E outlines the analysis of captive insurance companies.
