Financial Transactions 

The treasury function within a multinational business is a critical enabler in supporting growth. This function is charged with stewardship for financial and liquidity risk management, accessing capital markets to finance growth, enhancing governance and controls relating to flows of finance, and increasingly becoming a profit centre.

Common challenges and themes for treasury functions include ensuring visibility into global operations to establish cash and risk exposures, understanding the organisation’s liquidity position, managing foreign exchange volatility, deploying or repatriating cash, ensuring operational agility to respond to business or external changes, and embracing rapidly changing technology to enhance effectiveness or efficiency.

Global tax rules, and recent tax reforms, create myriad obligations which need to be understood and operated within. Absent this, tax implications can have a significant impact on, or can change, the effectiveness and outcomes of actions that treasury teams take.

Deloitte’s Financing and Treasury tax offering provides comprehensive, globally consistent advice to help a client’s tax and treasury teams navigate this landscape. Our work spans across;

• Operational advisory – Working with both tax and treasury to design and assess global policies that are sustainable from a tax perspective;
• Transactional advisory – Considering specific transactions, from the basic advancement of funds, to acquisitions, restructurings, risk mitigation transactions, assessing tax attributes, and reflecting or responding to legislative change; and
• Compliance and tax authority engagement – Assisting clients in ensuring that financial transactions are correctly accounted for, assessed for tax purposes, and to the extent required, working with tax authorities to understand positions taken.

The team collaborates with accounting advisory, treasury technology consulting, financial advisory, legal and other disciplines to ensure that when we advise our clients on the tax impacts of financial transactions, we do so in a way that is practical and implementable.

Key contacts:Ben Moseley, Mo Malhotra, Gemma Marshall

Interbank offered rates (IBORs) are interest rate benchmarks that underpin a huge number of loans and derivatives. The majority of London interbank offered rates (LIBORs) will be discontinued at the end of 2021. In assessing the overall risk and cost associated with transition away from IBORs, businesses should determine the potential tax implications, which could include taxable amounts arising from accounts carrying value changes or ‘disposal’ events caused by transition, ineffectiveness of hedging relationships for tax purposes, and transfer pricing considerations. Businesses should consider now any actions that could reduce the risk of adverse tax outcomes.

Read the article

Key contacts:Mo Malhotra, Ben Moseley

IBORs, including the London Interbank Offered Rate (“LIBOR”), have a key role in financial markets and underpin trillions of dollars in notional value of financial products. However, work is underway in multiple jurisdictions to transition to alternative nearly risk-free rates (“RFRs”) for the interest rate index used in calculating floating or adjustable rates for loans, bonds, derivatives and other financial contracts.

In the UK, the Financial Conduct Authority’s (“FCA”) intention is that at the end of 2021 it will no longer be necessary to persuade, or compel, banks to submit to LIBOR, and the Sterling Overnight Index Average (“SONIA”) will be applicable to GBP-denominated FCA-regulated instruments. Likewise, other RFRs will apply globally.

As businesses transition from IBOR to RFRs it is important, in assessing the overall risk and cost associated with transition, to determine whether there will be any tax implications, driven by the legal, commercial and accounting impacts.

Read the article

Authors: Seb Ma’ilei, Matej Cresnik, Jeremy Brown

Captive insurance companies are very much in the spotlight at present. The OECD’s February 2020 “Transfer Pricing Guidance on Financial Transactions” includes a section on captive insurance, and captives have been under particular scrutiny by the IRS, with resulting US case law on these arrangements. Alongside these developments, permanent establishment, residency, Diverted Profits Tax and other areas of tax continue to be of relevance for captives.

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Authors: Mo Malhotra (Tax), Ariel Krinshpun (US) and Ockie Olivier (Australia)

The authors evaluate how the OECD Transfer Pricing Guidance on Financial Transactions will influence an increasingly convoluted transfer pricing environment.

Overall, the guidance is welcome as it provides a number of helpful clarifications, and in many instances, reaffirms approaches that have historically been adopted in practice. However, the authors highlight a number of areas where differences of opinion or interpretation may arise, which is likely to make the environment more complex and challenging.

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Authors: Jari Ahonen and Juan Ignacio de Molina

The authors explore the temporal dimension of the application of the OECD Transfer Pricing Guidelines, and discuss certain international case law areas on the matter.

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Contacts: Ben Moseley (UK), Helen Chadwick (UK), Mo Malhotra (UK)
Country: UK

Maximising liquidity has been central to companies’ responses to COVID-19, and treasurers have been taking various actions accordingly.

Unexpected tax liabilities could limit the effectiveness of such actions, and could arise from a wide number of areas in respect of both internal and external transactions.

In this article, the authors explore a number of areas of UK tax legislation that should be kept in mind.

Read the article

Contacts: Mo Malhotra (Tax), Rachel Hossack (Legal)

Deloitte Legal has teamed with BRYTER, a member of the Deloitte Legal Ventures cohort, to develop this tool. This tool is free and provides easy, flexible and speedy access to information for users about cash repatriation from entities within selected jurisdictions. The tool covers a large set of countries and is regularly updated. To help you, the Cash Repatriation Tool prepares a summary in pdf format, which sets out the options that may be available within those jurisdictions for a range of entity types. The summary includes generic information in relation to the steps and formalities involved locally as well as a consideration of the tax position. Please note, that the tool provides a high-level overview to inform discussions based on the answers given and it does not constitute tax or legal advice. It should not be relied upon when making any cash repatriation decisions. The decision whether to repatriate cash, and when and how to effect any repatriation, is a complex decision which will include consideration of several tax and legal factors and this tool only provides information on certain factors.

Access the cash repatriation tool

COVID-19 has provided an unprecedented shock to the global economy, and the focus of most businesses is now on protecting employees, understanding the risks to their business, and managing supply chain disruptions. The full impact is still unknown, and many governments are taking unprecedented actions to support citizens and business.

Given the importance to business of cash flow, treasury teams are quickly evaluating cash management, financing, and risk management. Whilst business critical areas will rightly demand the most focus, tax can have a significant impact on, or change to, the outcomes of actions that treasury teams take. Click below to read our perspective on this area.

Read our detailed guide    Read our article in Tax Journal (June 2020)

Host: Ben Moseley

Presenters: Karlien Porre, Helen Chadwick, Mo Malhotra

Treasury teams are quickly evaluating cash management, financing needs and hedging priorities; responding to companies’ immediate liquidity needs, looking forward to the next phase of recovery. Any treasury actions are likely to have tax implications, which could directly impact on cash resources, so it’s important that treasury, finance, tax, transfer pricing and legal teams work together in designing and implementing strategies. In this webcast we discuss:

• Current considerations for treasury teams and the related tax implications - focusing on external and internal funding, cash and liquidity management, and foreign exchange, hedging priorities given volatile cash flows and financial markets;
• Key considerations for tax teams related to treasury operations - focusing on areas such as income-based interest limitations, transfer pricing of financial transactions, loss utilisation and financial instruments restructuring; and
• Practical steps for tax and treasury teams to think about now, and looking forwards to recovery.

View EMEA Dbrief Webcast    

Host: Kate Ramm

Presenters: Aart Nolten, Alexander Linn, Francois Pierson

The EU Anti-Tax Avoidance Directives (ATAD I & II) required Member States to introduce a number of domestic anti-abuse provisions, including anti-hybrid rules broadly in line with the OECD recommendations. Most of the anti-hybrid rules were required to be implemented into domestic law by 1 January 2020. Get an update on the implementation of these measures and what this could mean for transactions and arrangements undertaken by your organisation. We’ll discuss:

• The latest on the implementation of these rules in Germany, France and the Netherlands;
• Some practical consequences of these rules; and
• Practical steps to navigating the challenges of implementing these trends in existing processes and systems.

Find out what these rules mean for you from our Deloitte country specialists.

View EMEA Dbrief Webcast    

Host: Alison Lobb

Presenters: Mo Malhotra, Georgy Galumov

On 11 February 2020, the G20/OECD Inclusive Framework released new guidance to be included in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations on transfer pricing aspects of financial transactions. The release provides for the first time specific guidance to businesses and tax authorities on how to determine whether financial transactions between associated enterprises are consistent with the arm’s length principle. What does the new guidance cover? We discuss:

• The delineation of financial transactions;
• Treasury functions, intra-group loans, cash pooling and hedging; and
• Financial guarantees.

View EMEA Dbrief Webcast    

On 11 February 2020, as part of the G20/OECD Base Erosion and Profit Shifting (‘BEPS’) project, the Inclusive Framework on BEPS released its report ‘Transfer Pricing Guidance on Financial Transactions’ which includes new guidance on the transfer pricing aspects of financial transactions.

This is the first time that specific guidance on the pricing of intra-group financing transactions has been included, and represents a big step forward in preventing and resolving disputes in this area.

Read our guidance

With the new accounting standard IFRS 16 applying to periods beginning on or after 1 January 2019, IFRS/FRS101 adopters will be required to bring all operating leases onto the balance sheet. Many businesses applying the standard will need to calculate the net present value of the lease obligations using the lessee’s Incremental Borrowing Rates (“IBRs”) at the date of transition.

Find out how Deloitte can assist you

Host: Ben Moseley

Presenters: Helen Chadwick, Mo Malhotra, Gemma Marshall

The ‘Loan Relationships for Unallowable Purposes’ rule has been with us since 1996, but its importance has increased substantially in the last eight years, with a number of Tribunal and Court cases exploring the boundaries of the provision, and increased HMRC enquiry activity.

The rule can disallow deductions arising to companies from loans and transactions in loans (with an equivalent rule for derivatives), and in this session, we explore the current state of the case law, including what it tells us about three main building blocks of the provision.

We discuss:

• ‘Tax advantage’;
• ‘Main purpose’; and
• 'Just and reasonable apportionment’ of debits and credits.

View EMEA Dbrief Webcast    

IBORs, including the London Interbank Offered Rate (“LIBOR”), have a key role in financial markets and underpin trillions of dollars in notional value of financial products. However, work is underway in multiple jurisdictions to transition to alternative nearly risk-free rates (“RFRs”) for the interest rate index used in calculating floating or adjustable rates for loans, bonds, derivatives and other financial contracts.

In the UK, the Financial Conduct Authority’s (“FCA”) intention is that at the end of 2021 it will no longer be necessary to persuade, or compel, banks to submit to LIBOR, and the Sterling Overnight Index Average (“SONIA”) will be applicable to GBP-denominated FCA-regulated instruments. Likewise, other RFRs will apply globally.

As businesses transition from IBOR to RFRs it is important, in assessing the overall risk and cost associated with transition, to determine whether there will be any tax implications, driven by the legal, commercial and accounting impacts.

Find out how Deloitte can assist you

The evolving tax landscape means that groups may need to revisit their global intragroup funding profile and financing policies.

Read more about the recent developments, including key case law developments, and the implications for businesses.

Read more

There are many commercial benefits of cash pooling arrangements within groups of companies, which may include a reduction in external borrowing costs, liquidity management, better foreign exchange management, and greater visibility of cash flows.

These arrangements can result in potentially complex transfer pricing issues when determining the allocation of the benefit of such arrangements amongst members of a group.

We are seeing increasing scrutiny globally regarding cash pooling, particularly in the context of the OECD Transfer Pricing Guidance on Financing Transactions which explicitly provides guidance on financing structures that give rise to group synergies, and also a number of European and other legal development over the past few years.

On 6 February 2017, HMRC published its guidance on the tax considerations of cash pooling arrangements and how it expects these arrangements to be structured and priced.

Overall the guidance illustrates that HMRC, in common with other tax authorities, has an increased focus on cash pooling.

Read about the guidance

• Corporate Interest Restriction – Finance (No 2) Bill 2017 – Client Alert March 2017
• Corporate Interest Restriction – Finance Bill 2017 – Client Alert December 2016