This article provides an overview of some of the ways in which the recent financial and economic crisis has impacted the world’s financial markets and the financial transactions that take place within those markets. The authors seek to explore the potential impact of significant shifts in market conditions (and the behaviour of market participants) upon financial transactions between related parties.
This article will highlight potential transfer pricing issues relating to three broad categories of related party financial transactions: inter-company loans, cash pools, and guarantees. Given the increased scrutiny of tax authorities in this area, it is becoming more and more important for tax practitioners to be especially vigilant in this area. Although the transfer pricing of financial transactions may pose some administrative challenges, it may also provide opportunities that can be realized by the proactive taxpayer with the right planning, implementation, and monitoring processes.Intertax