This timely and practical workshop by Wolters Kluwer is specifically structured to provide an in-depth understanding of Loan Transactions, Intangibles, and Business Restructuring in Transfer Pricing using real-life case studies, interactive discussions, and practical applications.
A Highlight of Key Areas:
Introduction to Transfer Pricing & Key Concepts
- Overview of Transfer Pricing principles under OECD & local regulations
- Evolution of TP rules post BEPS from 2015 onwards - Importance of arm’s length principle
- The international yardstick to measure fairness across borders - Key challenges in intercompany transactions
- Group entities do not work always like independent entities and how to tackle that
Loan Transactions in Transfer Pricing
- Introduction to Intra-group Financial Transactions
- Why related-party financing is scrutinized
- Historical misuse of related party financial transactions
- Hybrid mismatch and double deduction
- Loan versus deemed equity
- Impact on tax base erosion and artificial profit shifting
- Regulatory frameworks: OECD guidelines, local regulations
- Anti-BEPS measures introduced post 2020
- Evolution of financial transactions and two-sided analysis
- Safe harbour measures for reduced compliance burden - Determining Arm’s Length Interest Rates
- CUP Method vs. Internal Comparable
- Best way to get there, and what taxpayers can do to achieve certainty
- Use of credit ratings in pricing loans
- Meaning and relevance of credit rating
- How is it done, using third party database or by using available financial data
- Implicit benefit from group association vs explicit benefit from guarantee
- Impact on arm’s length interest rate
- Risk-free vs. risk-adjusted returns
- Characterization of the entities involved using functional analysis
- Role and compensation of intermediaries for back-to-back loans
- Is interest free loan possible? - Case Studies on loans
- International TP cases on intercompany loans
- Pre-requisite of having economic substance and rational before extending loan
- Implicit versus explicit guarantee and its impact on interest rate - Loan Documentation & Compliance Best Practices
- What must be included in intercompany loan agreements
- A brief look at thin capitalization and earning stripping rules
- Ensuring alignment with international tax laws and avoiding penalties
Intangible Transactions in Transfer Pricing
- Defining Intangibles in a TP Context
- How intangibles are different than services, and how it can be mis-interpreted
- Types of intangibles (marketing, R&D, patents, trademarks, goodwill)
- OECD’s DEMPE (Development, Enhancement, Maintenance, Protection, Exploitation) framework - Pricing of Intangible Transfers
- CUP, profit-split, and valuation methods
- Considerations for Hard-to-Value Intangibles (HTVI) - Intragroup Royalty Arrangements & Challenges
- Setting arm’s length royalty rates including variable royalty linked to IP
- Substance requirements and economic ownership
- Responsible, Accountable, Consult and Informed (RACI) analysis - Case Studies involving IP
- Excessive royalty payment for marketing IP
- Excessive royalty payment for technology IP
- Use of cost sharing arrangement/cost-contribution analysis for transfer of IP
- Correct profit allocation and use of methodology - Documentation & Compliance Issues in Intangible Transactions
- Ensuring consistency with legal agreements (substance marries form)
- Challenges with tax authorities and possible pre-clearance to avoid audit
Business Restructuring & Transfer Pricing
- Introduction to Business Restructuring in TP
- Why companies restructure – key components of restructuring
- Common restructuring scenarios (centralizing functions, IP migration, supply chain changes) - Tax & TP Considerations in Business Restructuring
- Defining the TP impact of restructuring
- Functional analysis pre and post restructuring
- OECD guidelines on compensating for restructuring events - Valuation of Assets & Functions in Restructuring
- How to price a transferred business function and risks
- Exit charge/compensation and whether it is always applicable?
- Option realistically available
- Contractual assumption of risk v/s capacity to absorb the risk
- What if the restructure was due to government policies?
- In case of a continuous loss-making entity - Case Studies on IP Migration, restructuring & Exit Taxation
- Shift in profit post restructuring
- Treaty shopping
- IP transfer made to look like service transaction to avoid withholding taxes - Mitigating Transfer Pricing Risks in Business Restructuring
- Best practices for documentation and dispute resolution
- Possible approaches to avoid double taxation (e.g. APA)
Discussion & Q&A
- Use of ICAP initiative to obtain multilateral comfort with less administrative cost