Applying the Arm's Length Principle to Intra-group Financial Transactions: A Reference Guide

It is well known that intercompany financing arrangements have become increasingly subject to scrutiny in contexts of applying transfer pricing and anti-tax avoidance-related rules.

With contributions by more than 50 leading global transfer pricing and international tax experts from law firms, multinational enterprises, academia, and tax administrations, this book provides unparalleled insights into the application of the Arm’s Length Principle to different types of financial transactions, application of anti-avoidance rules to various intra-group financial arrangements as well as the business value creation process and the dispute management landscape that underlie intra-group financial transactions.

With in-depth analysis of the legislation and market developments that fuel the diverse range of financing options available to market participants – and loaded with practical examples and case studies that cover the legal and economic considerations that arise when analysing intra-group finance – the contributors examine such topics and issues as the following:

• national anti-abuse rules applicable to financial transactions;

• tax treaty issues;

• role of credit ratings and impact of implicit support;

• loans, cash pooling, financial guarantees;

• transfer pricing aspects of performance guarantees;

• ‘mezzanine’ financing;

• considerations for crypto financing;

• impact of crises situations such as COVID-19;

• how treasury operations can be structured in a group and the decision-making process involved;

• how hedges offset or mitigate risks;

• how to apply the arm’s length principle to factoring and captive insurance transactions;

• comparability analysis for various transactions;

• special considerations for transactions carried out by a permanent establishment;

• EU state aid and its interaction with transfer pricing rules;

• dispute prevention and resolution tools under the OECD, UN, and EU frameworks; and

• developing countries’ perspectives, focusing on Brazil, India, and South Africa.

Given the challenges facing taxpayers and tax authorities alike, this book will prove an immeasurably valuable reference guide to support tax practitioners, tax administrations, and tax scholars in developing standards and policies in dealing with intra-group financing issues.

Robert Danon is a full Professor of Law and heads the Tax Policy Center of the University of Lausanne. He also serves as the chairman of the Permanent Scientific Committee (PSC) of the International Fiscal Association (IFA). Next to his academic duties, Professor Danon is a founding partner of Danon, an independent tax firm. At the international level, his practice focuses on dispute resolution (including investment treaty arbitration), tax treaties and transfer pricing. He frequently acts as a consultant or expert witness in high-profile international investment arbitration cases or litigation procedures. He also advises governments and has testified before parliamentary committees in relation to international tax reforms. Vikram Chand is a Professor of Law at the University of Lausanne (UNIL), Switzerland. He currently also serves as the Program Director of the Executive Program in Transfer Pricing offered by UNIL, the Managing Editor of the Kluwer International Tax Law Blog, the International Tax Training expert for several tax administrations and the co-founder of the International Tax Law Research and Policy Network. He is also an independent tax practitioner and government advisor. His core areas of research expertise relate to the Application of the Arm’s Length Principle to various Intra Group Transactions in various industries, Tax Treaty Law and Interpretation, International Tax Avoidance, Taxation of the Digital Economy (Pillar II and Pillar I) as well as Tax Controversy Management. Guglielmo Maisto is the founder of Maisto e Associati, a tier-1 tax law firm with offices in Milan, Rome and London and a Professor of international and comparative tax law at the Università Cattolica di Piacenza. He is Vice-President of the International Fiscal Association (IFA), Chair of the European Region and President of the Italian Branch of the same organization. He is a member of the Board of Trustees of the International Bureau of Fiscal Documentation ( IBFD) in Amsterdam and of the Board of the American Chamber of Commerce in Italy, among others. He is a member of several law societies and on the editorial board of various Italian and foreign tax legal journals. Amanda Pletz brings 20 years of experience in applying economic analyses to transfer pricing and international tax matters, focusing on litigation, regulation, pricing, and valuation. Her expertise spans various industries, including amongst other private banking, asset management, fintech, private equity, real estate, insurance, trading, and banking sectors. Ms Pletz advises on capital structure, cash pooling, loan pricing, hybrid instruments, guarantees, captive insurance arrangements, leasing, and other asset valuations. She has authored expert reports for global tax audits, facilitated negotiations for advanced pricing agreements (APAs) with European tax authorities, and provided support in litigation and arbitration cases involving guarantees, valuations, financing arrangements, and state aid. Ms Pletz has been repeatedly recognized as a Global Elite Thought Leader by Who’s Who Legal for her expertise in transfer pricing.