Koncernintern finansiering: I relation til skatterettens armslængdeprincip

Kenneth Lønnquist Nielsen

Student thesis: Diploma thesis


Transfer pricing and the arm's length principle was one of the focal points of the Base Erosion and Profit Shifting (BEPS) project developed by the OECD and endorsed by the G20. The first action points was published back in 2015 and ultimately led to a revision of the OECD Transfer Pricing Guidelines for Multinational Enterprises (“TPG”). As a final touch to these revisions, the OECD has recently published(11 February 2020)a new chapter related to financial transactions to amend to the OECD TPG.
Intra-group financing provides incentive for multinational enterprises to manipulate with the groups overall interest deduction, in order to improve the groups overall profit after tax. Ultimately this can lead to a higher valuation of a company on the expense of high corporate tax jurisdictions’ tax base.
I have chosen to examine how the new guidance on financial transactions are to be applied in practice. Firstly, this entails a description, interpretation and systemization of the new chapter and amendments to the TPG. Secondly this entails a description of various and academically respected theories related to the determination of credit risk and establishment of a risk free and risk adjusted premium when transactions are entered into between independent parties.
I have then analyzed how these theories and methodologies can be applied by taxpayers and tax administrations in order to comply with the arms’ length principle and the new guidance in the OECD TPG. This analysis takes into account various current and special considerations that the guidelines do not specifically consider. This includes scenarios where debt is passed through multiple entities within a group; subordination issues related to Leveraged Buyout Transactions in Private Equity; involvement from third party lenders; the current zero and negative interest rate environment and the phasing out of the IBOR based interest rates.
Finally I concluded that although the new guidelines provide tax administration and tax payers with helpful and informative guidance in an area which has historically raised a lot of challenges in terms of application and consistency it also leaves a few questions unanswered. These questions need to be answered elsewhere, e.g. within the financial academic literature and in reports from credit rating agencies. Ultimately, the new chapter may put an extra compliance burden on taxpayers in general.

EducationsGraduate Diploma in Finance, (Diploma Programme) Final Thesis
Publication date2020
Number of pages88