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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:

Christopher Kinsella CTA
Chris is a tax partner with Minter Ellison with a focus on tax controversy matters. Chris has over 30 years experience advising in relation to tax matters. The Minter Ellison tax controversy team represents both taxpayers and the Commissioner in tax disputes in both the Federal Court and the AAT. Chris has extensive experience in advising taxpayers in relation to tax audits and reviews and their relationship with the Commissioner of Taxation. Last year Chris was heavily involved with the Chevron transfer pricing case. Current at 27 January 2015 Click here to expand/collapse more articles by Chris KINSELLA.
 
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