Tag: Group rating

New Zealand introduces Group Rating Approach for certain Cross-Border relatet party Borrowing and Debt Arrangements

New Zealand introduces Group Rating Approach for certain Cross-Border relatet party Borrowing and Debt Arrangements

The OECD’s final report on interest limitation rules notes that thin capitalisation rules are vulnerable to loans with excessive interest rates and many transfer pricing practicioneres finds that transfer pricing may not the most effective way to prevent profit-shifting using high-priced related party debt. Related-party transactions are fundamentally different to third-party transactions. Factors that increase the riskiness of a loan between unrelated-parties (such as whether the debt can be converted into shares or the total indebtedness of the borrower) are less relevant in a related-party context. In New Zealand new rules on pricing of cross-border borrowing and debt has been implemented according to which interest deductions can be restricted. Questions asked under the new rules: Draft guidance on these rules was issued by the New Zealands Inland Revenue in August 2018. New Zealand 2018-sr-beps-interest-limitation ... Continue to full case
France vs General Electric France, June 2017, Conseil d État, Case No 392543

France vs General Electric France, June 2017, Conseil d État, Case No 392543

The Supreme Administrative Court laid down the factors to be applied in determining the abnormal nature of the remuneration of intragroup loans. “The normal or abnormal nature of the remuneration of loans taken by an enterprise from another enterprise to which it is affiliated must be assessed in relation to the remuneration that the lender should pay to a financial institution or similar body to which the enterprise is not related and would borrow, under similar conditions, sums of an equivalent amount. A lender’s assessment of the default risk of the borrower, whose risk premium is the consideration, depends on the debtor’s ability to repay the debt to the obligee until maturity. The assessment of the solvency risk of the borrower, in particular summarized in the periodic ratings that the rating agencies attribute to the companies that may, where appropriate, solicit them to this effect, results from the analysis of the evolutions of a series. economic variables, both internal and ... Continue to full case