The OECD Releases Discussion Draft on Financial Transactions
In addition to providing guidance on a number of transfer pricing related issues relating to aligning transfer pricing outcomes with value creation, the 2015 final report on Base Erosion and Profit Shifting - Actions 8 to 10 mandated follow-up work on the transfer pricing aspects of financial transactions. The Organisation for Economic Co-operation and Development’s (“OECD’s”) Committee on Fiscal Affairs Working Party No. 6 has produced a discussion draft that aims to clarify the application of the principles relating to intra-group financial transactions. The discussion draft was finally published on 3 July 2018. The OECD invites interested parties to submit any comments on this discussion draft by 7 September 2018.
Each section is also sub-divided into different sections. Section B.1 of the discussion draft elaborates on how the accurate delineation analysis, which requires an analysis of the factors affecting the performance of businesses in the industry sector in which the Multinational Enterprise (“MNE”) group operates, applies to the capital structure of a MNE within a 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.
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