Transfer Pricing Guidance on Financial Transactions

OECD issued Transfer Pricing Guidance on Financial Transactions.

The Organization for Economic Co-operation and Development (OECD) issued Transfer Pricing Guidance on Financial Transactions (Guidance), published on OECD’s website on February 11, 2020. This Guidance is developed as a part of the Base Erosion and Profit Shifting (BEPS) actions plan that is aimed at fighting the tax base erosion and the shifting of profits from the taxation.

Russia is a participant of this actions plan, therefore, the use of explanations and examples provided in the Guidance within the Russian tax dispute and court practice is not excluded. Moreover, the tax control of prices within financial transactions is regulated by the provisions of article 269 of the Russian Tax Code, which, among other things, establishes the limit ranges of interest rates for purposes of interest income and expenses recognition in tax accounting. Thus, if the interest rate within a Russian taxpayer’s loan does not correspond to the minimum or maximum limits of the range, a taxpayer must conduct a TP analysis for this loan in accordance with section V. 1 of the Russian Tax Code. However, this section does not contain the comprehensive information about what factors should be assessed within a TP analysis of financial transactions and how to consider and adjust those factors when calculating the arm’s length ranges.

In this case the documents and explanations from international economic organizations can assist Russian taxpayers in a TP analysis conduction, as section V. 1 of the Russian Tax Code adopted by Federal Law No. 227-FZ dated 18.07.2011, is based on OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. It is also important to note that both courts and taxpayers have increasingly referred to OECD documents within tax disputes of the recent years.

Particular attention of the Guidance is drawn to intra-group loan transactions covering the following key issues:

  • analysis of the economic nature of intra-group loan financing, including assessment of risks of a loan re-qualification into other operations, such as a hidden distribution of dividends or equity contribution;
  • financial and economic circumstances of transactions that can affect the arm’s length range of interest rates;
  • credit rating as the key factor of the arm’s length range calculation;
  • determining the arm’s length range of interest rates and approaches of applying the comparable uncontrolled price method.

Meanwhile, the Guidance provides explanations and examples in relation to more complex financial transactions, such as:

  • cash pooling;
  • hedging;
  • financial guarantees;
  • captive insurance.

The new Guidance is freely available on the OECD website at the link below:


The tax authorities’ attention to controlled transactions was previously focused on operations of goods buy-sell, mainly, related to commodities and agricultural raw materials. Currently, the tax authorities’ focus starts to shift to other, more complex types of transactions unrelated to goods buy-sell, in particular, financial transactions.

We believe that the explanations and examples provided in the Guidance will be also relevant to Russian taxpayers, allowing them to conduct more accurate assessment of tax risks and determination of the arm’s length range of remuneration within the relevant financial transactions.