KPMG article: Seeking certainty in an uncertain era for financial transactions

Chapter X of the OECD transfer pricing guidelines provides direction on how to assess arm’s-length prices for financial transactions, including intragroup loans, cash pooling, financial guarantees, and captive insurance.

Among these, intragroup loans are the most common type of transaction, raising not only the question of what the right interest rate is but also questions concerning the arm’s-length quantum of supportable debt. The OECD guidelines conceive of this as a matter of accurately delineating the funding transaction, though countries’ rules vary on debt/equity questions and the potential relevance of transfer pricing considerations to those determinations.

In the current environment, companies are faced with unprecedented uncertainty in managing their tax obligations and business performance. Moreover, a prolonged period of higher interest rates has attracted increased tax authority attention to financial transactions. Competent authority procedures—specifically, the mutual agreement procedure for resolving double taxation arising from tax authorities’ adjustments and the advance pricing agreement program for prospective certainty—are valuable tools for obtaining tax certainty on transfer pricing issues. Yet for financial transactions, taxpayers have historically been less likely to proactively seek certainty, partly because of the often brief lead time for implementation of these transactions (for example, an intercompany loan issued in connection with an acquisition).

Read a May 2025 article* prepared by KPMG LLP tax professionals that discusses the various avenues open to companies with significant financial transactions for managing the associated risks and uncertainty.

*This article appears in Tax Notes International (May 12, 2025) and is provided with permission.