ATO rules that transfer pricing provisions override debt-equity rules

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ATO rules that transfer pricing provisions override debt-equity rules- 24 July 2019

Tax Insights

The ATO issued Taxation Determination TD 2019/10 on 3 July 2019, which deals with the interaction of the transfer pricing rules and the debt / equity rules. 

The ATO’s view is that the debt / equity rules cannot limit the operation of the transfer pricing rules for related party financing transactions. The ATO view is that the debt/equity rules apply to classify the interest that arises by reference to the arm’s length conditions which are identified, not to the actual conditions.

Although the approach in TD 2019/10 is broadly in keeping with past practice (TD 2008/20), taxpayers should consider their cross border related party financing arrangements from the perspective of transfer pricing rules, rather than merely rely upon the approach taken in the debt-equity rules.

Tax insights - ATO rules that transfer pricing provisions override debt-equity rules
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