Application of the OECD Transfer Pricing Methods in the Financial Services Sector

Abstract

In the modern world, multinational enterprises have a huge impact on today’s economy. Thes companies operate in counties all around the world. However, because these countries have different tax regulations these MNEs use different practices to avoid paying taxes. One of the methods used for tax avoidance is transfer pricing. In order to prevent that the OECD issued the transfer pricing guidelines that establish the main principle and methods of transfer pricing. However, these guidelines are a generic document that fails to address the specific considerations of the financial services sector. In this paper, the analysis of the relevant literature regarding transfer pricing, especially in the financial services industry, was conducted to identify the specifics of the sector and how they can be addressed and dealt with when applying transfer pricing. It was established that the institutions such as banks or insurance companies operate through permanent establishments which require special consideration and application of the Authorised OECD Approach. Apart from that, regular methods of transfer pricing can be applied when dealing with specific intragroup transactions in the financial industry.