ICC Welcomes OECD Draft on Transfer Pricing Aspects of Financial Transactions

ICC Welcomes OECD Draft on Transfer Pricing Aspects of Financial Transactions

The International Chamber of Commerce (ICC) has largely welcomed the OECD’s public discussion draft on the transfer pricing aspects of financial transactions.

The discussion draft deals with follow-up work in relation to base erosion and profit shifting (BEPS) Actions 8-10, on assuring that transfer pricing outcomes are in line with value creation.

Commenting on the draft, the ICC said: “The key issue that runs through several aspects of the paper is whether the arm‘s length principle, including a full functional analysis and delineation of the transaction, should be applied when analysing the conditions surrounding intercompany financial transactions. ICC supports the OECD position that ‘the arm’s length principle should govern the evaluation of transfer prices among associated enterprises.’ This position is viewed as the best way to avoid double taxation and therefore encourage cross-border trade and investment.”

ICC said that it supports the OECD’s position when it states, at para 1.6 of the guidance, that the “separate entity approach treats the members of an MNE group as if they were independent entities.”

ICC, however, called for further examples to help clarify the application of the arm’s length principle and noted that whether the OECD’s transfer pricing guidance for financial transactions should apply retroactively or not needs to be clarified.

Also responding to the discussion draft, Insurance Europe, European insurance and reinsurance federation, called for greater clarity in the draft to ensure that the guidance is correctly applied. In particular, the paper should differentiate more clearly between captive insurance transactions and other forms of (re)insurance and between non-insurance multinational groups and multinational insurers, Insurance Europe noted.