Episode 116: Special Edition – Financial Transactions Transfer Pricing

Connecting the dots: Transfer pricing above and below EBIT 

In this episode, David Ledure (Global Financial Transaction Transfer Pricing Leader, PwC Belgium), Tanja Keser (Transfer Pricing Partner, PwC Germany), and Alex Xiang (Asia Pacific Financial Transaction Transfer Pricing Leader, PwC Hong Kong SAR) discuss the complex interplay between financial transactions and operational transfer pricing, including how activities above and below the EBIT line interact. Key topics include intercompany payment terms, the treatment of extended trading balances, the potential for embedded interest components in sales, challenges in incorporating below-EBIT elements like forex gains or factoring costs, hedging mismatches across entities, and the evolving use and scrutiny of working capital adjustments. They also explore factoring, parent guarantees, and the transfer of intellectual property, highlighting how consistency in financial and operational policies is critical to managing risk and ensuring alignment in tax and valuation outcomes.

Authors: David Ledure, Tanja Keser, Alex Xiang