Transfer Pricing Aspects of Intra-Group Financing

Raffaele Petruzzi

Oct 2013 · Kluwer Law International B.V.

Ebook

338

Pages

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About this ebook

For corporate managers, maximization of the profits and the market value of the firm is a prime objective. The logical working out of this principle in multinational enterprises has led to an intense focus on transfer pricing between related companies, principally on account of the very attractive tax advantages made possible. Inevitably, numerous countries have established transfer pricing legislation designed to combat the distortions and manipulations that are inherent in such transactions. This important book, one of the first in-depth analysis of the current worldwide working of transfer pricing in intra-group financing and its resonance in law, presents the relevant issues related to loans, financial guarantees, and cash pooling; analyses an innovative possible approach to these issues; and describes new methodologies that can be implemented in practice in order to make intra-group financing more compliant with efficient corporate financing decisions and the generally accepted OECD arm’s length principle.

Comparing the tax measures implemented in the corporate tax law systems of forty countries, this study investigates such aspects of intra-group financing as the following:

– corporate finance theories, studies, and surveys regarding financing decisions; – application of the arm’s length principle to limit the deductibility of interest expenses; – impact of the OECD’s Base Erosion and Profit Shifting (BEPS) project; – transfer pricing issues related to intra-group financing; – credit risk in corporate finance; – rationales utilized by credit rating agencies; and – the assessment of arm’s length nature of intra-group financing.

The author describes ways in which the application of the arm’s length principle can be strengthened and how the related risk of distortion and manipulation can be minimized. The solutions and methodologies proposed are applicable to any business sector.

Given that determination of the arm’s length nature of transactions between related companies is one of the most difficult tasks currently faced by taxpayers and tax administrations around the world, this thorough assessment and analysis will prove extraordinarily useful for in-house and advisory practitioners, corporate officers, academics, international organizations, and government officials charged with finding effective responses to the serious issues raised. In addition to its well-researched analysis, the book’s comparative overview of how loans, financial guarantees, and cash pooling are currently addressed by OECD Member States and by their national courts is of great practical value in business decision making.

About the author

Dr. Raffaele Petruzzi, LL.M., is Managing Director of the WU Transfer Pricing Center at the Institute for Austrian and International Tax Law at WU (Vienna University of Economics and Business) and international tax advisor specializing in international corporate taxation and transfer pricing within the transfer pricing department of Deloitte, Vienna (Austria).Since 2007, Raffaele has gained extensive experience in dealing with topics related to international corporate taxation and transfer pricing both from a practical perspective (by working in different countries within big four companies and in the tax department of a multinational) and from an academic perspective. From the practical perspective, he has gained relevant experience in advising clients on specific topics (such as international tax issues and transfer pricing issues related to services, permanent establishments, financing, business restructuring, intangibles, and indirect taxes), international tax and transfer pricing risk management and compliance, drafting and reviewing intra-group agreements, and optimizing international tax structures. From the academic perspective, he is a frequent speaker in international conferences, lecturer of numerous courses, and author of several publications on international tax and transfer pricing topics.Raffaele holds a Master of Science degree in Business Administration and Law (major: Corporate Taxation) at Bocconi University (Italy), a Master of Laws degree (LL.M.) in International Tax Law at WU, and a PhD in International Business Taxation (DIBT Program) at WU.

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