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Intragroup debt financing and transfer pricing in Australia

Published on 01 Jun 14 by "THE TAX SPECIALIST" JOURNAL ARTICLE

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.

Author profile:

Chris KINSELLA
Chris is the partner in charge of the financial services tax practice at PricewaterhouseCoopers and specialises in taxation issues impacting banks and other financial institutions. Chris has a key role within PwC on TOFA implementation and is interested in the practical and commercial implications for taxpayers of transitioning to the TOFA regime.
Current at 6 November 2008
Click here to expand/collapse more articles by Chris KINSELLA.
 
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