Tax experts cheer move to fix transfer pricing

taxation5Author: Amanda Visser (BDlive)

The headache of fictional loans attracting fictional interest “forever and a day” — caused by transfer-pricing rules changing in 2012 — appears to have been relieved by the latest budget.

Before the Treasury’s move this year, a secondary transfer pricing adjustment — which occurs in some transactions between a company and its foreign subsidiaries — had been treated as a deemed loan.

The problem is that a company can almost never get a deemed loan off its books as it is not a loan requiring repayment. The loan attracts interest, which has a tax implication, and this was set to become a recurring problem for companies and tax practitioners.