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Which difficulties will multinational companies face regarding intre-group financing transactions at the time of the implementation of the OECD action plan against base erosion and profite shifting ?

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Chometon, Sandy ULiège
Promotor(s) : Philippe, Denis-Emmanuel ULiège
Date of defense : 23-Jun-2016/28-Jun-2016 • Permalink : http://hdl.handle.net/2268.2/1281
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Title : Which difficulties will multinational companies face regarding intre-group financing transactions at the time of the implementation of the OECD action plan against base erosion and profite shifting ?
Author : Chometon, Sandy ULiège
Date of defense  : 23-Jun-2016/28-Jun-2016
Advisor(s) : Philippe, Denis-Emmanuel ULiège
Committee's member(s) : von Frenckell, Eric ULiège
Richelle, Isabelle ULiège
Language : English
Discipline(s) : Business & economic sciences > Finance
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Banking and Asset Management
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège

Abstract

[en] Multinational groups resort more and more to cross-border intra-group financing transactions. These transactions may be used to shift profits from high- to low-tax jurisdictions to decrease the tax burden of the entire group. Multinational corporations have two possibilities to reach this objective. They can either use excessive internal debts (adjusting the capital structure of the subsidiaries) or manipulate the transfer price on the intra-group financing operations. The arm’s length principle and the thin capitalisation rules have already been introduced in order to fight against tax optimisation. However, this standard and these rules seem not effective enough to prevent multinational companies from using intra-group financing transactions like tax planning strategies. Therefore, the Organisation for Economic Co-operation and Development (“OECD”) suggested an action plan against Base Erosion and Profit Shifting (“BEPS”) in 2015, including new recommendations. Along with the OECD, the European Commission also committed to implement new restrictions. Interest deduction limitation rules and reporting requirements belong to actions recommended by the OECD and the European Commission. Furthermore, the OECD also revised the guidelines on transfer pricing. This revision aims to ensure that a transfer price is determined by considering both the contractual terms of the transaction and the real conduct of the parties. Based on these new rules and recommendations, the profits would be taxed in the jurisdiction where the economic activity generating these profits takes place. Consequently, these actions will impact multinational groups on their financial situation and could also affect their reputation.


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  • Chometon, Sandy ULiège Université de Liège > Master sc. gest., fin. spéc. banking & asset (ex 2e master)

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