Archive for the ‘Financial’ Category

Financial transfer pricing

May 01, 2013  |   Blog,Financial   |     |   1 Comment

Financial transfer pricing

The transaction The parent company of a multinational group operating in the financial sector granted intercompany loans to its subsidiaries, including the Italian company, in order to provide them with liquidity necessary to provide loans to their end customers. Activities carried out Within  the preparation of the local transfer pricing documentation it was required to perform  an economic analysis on Transfer Pricing for the determination of  the fair market value of intercompany loans lent in particular to the Italian company. Details of the project In particular, the following analysis were carried out: Method selection With specific reference to intercompany financial transactions, both the OECD report (1) and the Italian Ministry of Finance (2) have considered  preferentially adoptable  the method of comparable uncontrolled price: under this method, the arm’s length nature of funding is determined by comparing the interest rate under analysis with what would be charged for comparable transactions between independent enterprises (the so-called external comparison), or between one of the companies carrying out the transaction and an independent company (the so-called internal comparison). Application of the method Under this method, as clarified by the Ministry of Finance and the ...