TPG2022 Chapter X paragraph 10.23

Category: B. Interaction with the guidance in Section D.1 of Chapter I, TPG2022 Chapter X: Transfer pricing aspects of financial transactions | Tag: , , , ,
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In accurately delineating the actual financial transaction, a functional analysis is necessary. This analysis seeks to identify the functions performed, the assets used and the risks assumed by the parties to that controlled transaction.






Related Guidelines

  1. TPG2022 Chapter X paragraph 10.27In some instances, the functions of the lender and the borrower may be undertaken by the same entity in different transactions. That could be the case, for example, of centralised treasury activities within an MNE group where the treasury entity raises and provides...
  2. TPG2022 Chapter X paragraph 10.26From the perspective of the borrower, the relevant functions would usually refer to ensuring the availability of funds to repay the principal and the interest on the loan in due time; providing collateral, if needed; and monitoring and fulfilling any other obligation derived...
  3. TPG2022 Chapter X paragraph 10.25When, under accurate delineation, the lender is not exercising control over the risks associated to an advance of funds, or does not have the financial capacity to assume the risks, such risks should be allocated to the enterprise exercising control and having the...
  4. TPG2022 Chapter X paragraph 10.24For instance, in the particular case of an intra-group loan, the key functions performed by a lender to decide whether and under which terms to advance funds would typically include an analysis and evaluation of the risks inherent in the loan, the capability...
  5. TPG2022 Chapter IX paragraph 9.18The accurate delineation of the transactions comprising the business restructuring requires performing a functional analysis that seeks to identify the economically significant activities and responsibilities undertaken, assets used or contributed, and risks assumed before and after the restructuring by the parties involved. Accordingly,...
  6. TPG2022 Chapter X paragraph 10.37For example, consider that Company A, a member of AB Group, advances funds with a term of 10 years to an associated enterprise, Company B, which will use the funding for short-term working capital purposes. This advance is the only loan in Company...


Related Case Law

  1. 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...
  2. Spain vs “XZ SA”, March 2022, TEAC, Case No Rec. 4377-2018“XZ SA” is a Spanish parent of a tax consolidation group which is part of a multinational group. The Spanish group participates in the group’s cash pooling system, both as a borrower and as a provider of funds. The objective of cash pooling...
  3. India vs. Quark Systems Pvt. Ltd. Oct 2014, ITA No.282Quark Systems Pvt. is engaged in providing customer support services on behalf of the Quark Group. TNMM had been applied as the most appropriate method for determining arm’s length income. In an audit, the tax administration rejected one of the companies selected as a comparable on the basis that...
  4. Sweden vs Pandox AB, February 2022, Administrative Court, Case No 12512-20, 12520–12523- 20 and 13265-20Pandox AB is the parent company of a hotel group active in northern Europe. Pandox AB’s business concept is to acquire hotel property companies with associated external operators running hotel operations. Pandox AB acquires both individual companies and larger portfolios, both in Sweden...
  5. European Commission vs Amazon and Luxembourg, December 2023, European Court of Justice, Case No C‑457/21 PIn 2017 the European Commission concluded that Luxembourg had granted undue tax benefits to Amazon of around €250 million. According to the Commission, a tax ruling issued by Luxembourg in 2003 – and prolonged in 2011 – lowered the tax paid by Amazon...