Transfer pricing Miscellaneous 2014

Intragroup debt financing and transfer pricing in Australia

Source: The Tax Specialist Journal Article

Published Date: 1 Jun 2014


Intragroup financing within multinational groups can generate tax risk, and that tax risk has increased in recent years. One factor is the tendency on the part of revenue authorities to view intragroup debt funding as a means by which corporations can shift their tax exposure. This article considers transfer pricing issues and observations as they impact on intragroup debt. The article also touches on thin capitalisation.

The article considers quantum and pricing of debt, including the role of thin capitalisation, comparable transactions, the case law on key transfer pricing questions, pricing guarantees between parents and subsidiaries, the role of credit ratings, and how the Commissioner could apply the arm’s length principle embodied in Australian tax law to intragroup debt finance practices. Finally, the article considers how Australia’s domestic transfer pricing rules interact with the associated enterprises article contained in Australia’s double tax agreements.

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Transfer pricing Miscellaneous 2014

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