TPG2020 Chapter X paragraph 10.168

Category: D. Financial guarantees, D.1. Accurate delineation of financial guarantees, OECD Transfer Pricing Guidelines (2017), TPG2020 Chapter X: Financial Transactions | Tag: , , ,
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Likewise, the financial capacity of the guarantor to meet its obligations requires an analysis of the correlation between the guarantor’s and borrower’s businesses. In situations where the guarantor and the borrower operate under similar market conditions, an adverse market event that affects the performance of the borrower and increases its risk of default might also affect the guarantor and its capacity to fulfill its obligations.






Related Guidelines

  1. TPG2022 Chapter X paragraph 10.169This section describes a number of pricing approaches for those circumstances where a guarantee is found to be appropriate. However, when the accurate delineation of the actual transaction indicates that the purported guarantee is not a guarantee, other pricing approaches should be considered,...
  2. TPG2022 Chapter X paragraph 10.167A lender would benefit from the stronger credit rating of the guarantor (compared to the borrower’s credit rating) and/or the guarantor’s asset pool (in addition to the borrower’s asset pool), and the borrower accordingly may expect a benefit in the form of a...
  3. TPG2022 Chapter X paragraph 10.166The examination of financial guarantees under accurate delineation needs also to consider the financial capacity of the guarantor to fulfill its obligations in case of default of the borrower. This requires an evaluation of the credit rating of the guarantor and the borrower,...
  4. TPG2022 Chapter X paragraph 10.88The following paragraphs present different approaches to pricing intra-group loans. As in any other transfer pricing situation, the selection of the most appropriate method should be consistent with the actual transaction as accurately delineated, in particular, through a functional analysis (see Chapter II)....
  5. TPG2022 Chapter X paragraph 10.159Where the effect of an intra-group guarantee as accurately delineated is to reduce the cost of debt-funding for the borrower, it might be prepared to pay for that guarantee, provided it was in no worse a position overall. In considering the borrower’s overall...
  6. TPG2022 Chapter X paragraph 10.165A similar issue arises in respect of cross-guarantees, where two or more entities in an MNE group guarantee each other’s obligations. From the lender’s perspective, it has access to the assets of every cross-guaranteeing entity in the event of a default by a...
  7. TPG2022 Chapter X paragraph 10.162This section elaborates on the effect of group membership on determining the arm’s length price of financial guarantees, building upon the principles laid out in Section C.1.1....
  8. TPG2022 Chapter X paragraph 10.168Likewise, the financial capacity of the guarantor to meet its obligations requires an analysis of the correlation between the guarantor’s and borrower’s businesses. In situations where the guarantor and the borrower operate under similar market conditions, an adverse market event that affects the...
  1. EU Report on Improving the Functioning of the Arbitration Convention (2015)In April 2015 the Forum agreed on a Report on Improving the Functioning of the Arbitration Convention including a revised Code of Conduct for the effective implementation of the Arbitration Convention. The report and the revised Code of Conduct are the result of...
  2. United Arab Emirates issues comprehensive Transfer Pricing Guide23 October 2023, the United Arab Emirates issued a comprehensive practical Transfer Pricing Guide. The guide is designed to provide general guidance on the Transfer Pricing regime in the UAE with a view to making the provisions of the Transfer Pricing regulations as...

Related Case Law

  1. Poland vs Cash Pool B sp z.o.o., November 2019, Supreme Administrative Court, Case No II FSK 3798/17At issue in this case was whether a deposit in a cash pool constituted a loan. According to the company, cash transfers made as part of cash pooling cannot be considered a loan agreement because they do not contain elements that are material...
  2. Poland vs L S.A, June 2019, Supreme Administrative Court, Case No. II FSK 1808/17 – Wyrok NSAA Polish subsidiary in a German Group had taken out a significant inter-company loan resulting in a significantly reduced income due to interest deductions. At issue was application of the Polish arm’s length provisions and the arm’s length nature of the interest rate...
  3. Spain vs “X Iberica SA”, October 2019, TEAC, Case No Rec. 6537/2017“X Iberica SA” is a Spanish subsidiary of a multinational group and also a participant in the group’s cash pooling system, both as a borrower and as a provider of funds. When the group is not able to finance itself, the vehicle called...
  4. France vs Carrefour, February 1992, Supreme Administrative Court no 81690/82782In the French Carrefour case, the French Supreme Administrative Court considered a rate of 0.25% for a loan guarantee to be at arm’s length. According to the Court, the remuneration should be commensurate with the risk incurred as well as with the market...