PwC Switzerland’s David McDonald and Michalis Louca discussed on July 7 how inter-company financing transactions should be priced in the light of OECD’s new guidelines for financial transactions.
Key changes and principles
- A new description of a transaction: an assessment of options realistically available to borrower and lender including an assessment of market/economic conditions.
- The volume of loan must not exceed the amount that the borrower could/would have borrowed.
- Only a small return can be justified to a lender/guarantor/treasury center.
Challenges and Actions
Groups will need a process for new transactions (assessing the key terms, the quantum of the loan, the lender, and the borrower perspective) and to perform a one-off review of existing transactions for compliance with the new requirements.
Treasury Functions – intra-group loans and cash pooling (CP)
- Pricing loans between group companies will require credit rating analyses.
- Interest rates should be benchmarked; bank quotes should not be used as benchmarks.
- Most cash pools will need to amend the rationale for economic returns.
- The rates that participants get from the pool versus local market rates should be tested.
- Cash pool positions should be only short term.
Financial guarantees:
- No guarantee fees payable unless there is an explicit guarantee.
- Perform benefit assessment.
- MNEs need to assess when a guarantee fee is/is not charged accordingly.
- Groups may choose to change the agreements covering the guarantee, rather than changing the pricing.
PwC Slides of this Webinar July 7th 2020
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Das HSLU in Zug offeriert am 21. und 28.10.2020, 4.11.2020 den Kurse Fachkurs Swiss Treasury Practice: Aktuelle Herausforderungen im Corporate Treasury durch.
“Der Fachkurs thematisiert aktuelle steuerliche und rechtliche Problemstellungen u.a. in den Bereichen Transfer Pricing, Cash Pooling und Accounting”
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