2008

Transfer Pricing - How Much Does Your Debt Cost?

Source: New South Wales

Published Date: 18 Nov 2008

 
This event was aimed at CFOs, financial controllers and tax managers of companies with intra-group financing arrangements or loan guarantees.

With the global credit crunch and liquidity crisis, the cost of debt funding for multinationals is rising rapidly. Did you know that since mid-2007, risk margins, (i.e. credit spreads) for debt funding have more than doubled?

In the current environment of variable international interest rates, increased uncertainty and reduced liquidity, many multinationals are looking to fund from within. A recent survey of companies in the Asia-Pacific region showed that over 45% of companies are reacting to the crisis by relying more on internal funding sources or requiring parental guarantees to raise debt. The ability of an entity to provide liquidity is rapidly becoming a key function within multinationals.

As a result of these changes in market conditions, it is important to ensure that inbound and outbound debt is priced appropriately. Furthermore, recent scrutiny by the ATO on financing also means you need to be able to defend interest rates on intra-group debt arrangements. According to the ATO, even if gearing is within the thin capitalisation "safe harbour', you may need to demonstrate that the interest rate charged is arm's length with regard to how much the company may have been able to borrow in the market.

The time is right to re-examine the pricing of your intra-group funding arrangements.

Transfer pricing - How much does your debt cost?

Author(s): David Grecian , Geoff Gill ATI

Details

  • Published On:18 Nov 2008
  • Took place at:Swissotel, Sydney

The material is copyright. Apart any fair dealing for the purpose of private study,

research critisism or review, as permitted under the copyright Act, no part may be rerpoduced by any process without written permission from The Tax Institute.

Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

This material is copyright. Apart from any fair dealing for the purpose of private study., research, critisism or review, as permitted under teh copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.

Unless expressly stated, opininons are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

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