Tim Keeling and Aaron Yeo provide some general observations on the OECD's recent released transfer pricing discussion draft.
The Organisation for Economic Co-operation and Development (OECD) has recently released a public discussion draft (PDF 1.09MB) on transfer pricing for financial transactions and invited input from commentators. The draft has been eagerly awaited and such is the complexity and difference in views surrounding financial transactions, the draft has been released as a non-consensus document.
The draft provides commentary on a number of topics including intra-group loans, guarantees, cash pooling, treasury functions and captive insurance arrangements. The draft also qualifies its observations and comments by noting that they are contingent on specific facts and circumstances.
A number of general observations from the discussion draft are summarised below:
Given the discussion draft is a non-consensus document, it is possible that there may be a number of changes before guidance is formally released. However, it raises a number of technical issues which are complex and if included in formal guidance, could be challenging to substantiate with evidence. For instance, it will be interesting to see how the Australian Taxation Office's guidance on guarantee fees and derivatives, expected later this year, aligns to or addresses the OECD's discussion draft.
Given transfer pricing for financial transactions continues to be a high-focus area, taxpayers should continue to remain abreast of developments and ensure that appropriate evidence and documentation support is in place for their intra-group financial transactions.