0 0 Fairness and ++ ++ 0 equity Option 1 has fairness benefits as it Option 2 has fairness benefits as it On the one Option 4 would would ensure taxpayers cannot have would ensure taxpayers cannot have hand, option not prevent excessive interest rates on their excessive interest rates on their 3 would be firms from related-party debts. related-party debts. somewhat achieving effective at excessive preventing interest rates excessive on related-party interest rates. debt. For On the other taxpayers hand, it could willing to result in exceed the interest denial administrative for firms with safe, harbour very this option is no conservative different to the interest rates status quo. and debt positions (say, for example, if a taxpayer is in loss). 0 + Efficiency of ++ + 0 compliance Option 1 would reduce compliance Option 2 would reduce compliance Compliance Option 4 would costs for many taxpayers the costs somewhat, as the interest rate costs in some reduce – allowable interest rate on related-party cap would be available as a safe instances compliance debt would be set on a clear objective harbour. would reduce costs factor (the credit rating of the foreign under option somewhat, as Taxpayers not utilising the safe harbour parent). 3, as there the interest rate will still be required to do a transfer would be cap would be However, in some cases where the pricing analysis (i.e. same as status – fewer transfer available as a non-resident parent has no credit quo) pricing safe harbour. rating compliance costs will stay the – disputes same or could potentially increase. Taxpayers not about utilising the debt. safe harbour will still be However, an required to do a transfer pricing rule analysis (i.e. would be a
Fairness and equity ++ Option 1 has fairness benefits as it would ensure taxpayers cannot have excessive interest rates on their related-party debts. ++ Option 2 has fairness benefits as it would ensure taxpayers cannot have excessive interest rates on their related-party debts. 0 On the one hand, option 3 would be somewhat effective at preventing excessive interest rates. On the other hand, it could result in interest denial for firms with very conservative interest rates and debt positions (say, for example, if a taxpayer is in loss). 0 Option 4 would not prevent firms from achieving excessive interest rates on related-party debt. For taxpayers willing to exceed the administrative safe, harbour this option is no different to the status quo. 0 Efficiency of compliance ++ Option 1 would reduce compliance costs for many taxpayers – the allowable interest rate on related-party debt would be set on a clear objective factor (the credit rating of the foreign parent). However, in some cases – where the non-resident parent has no credit rating – compliance costs will stay the same or could potentially increase. + Option 2 would reduce compliance costs somewhat, as the interest rate cap would be available as a safe harbour. Taxpayers not utilising the safe harbour will still be required to do a transfer pricing analysis (i.e. same as status quo) 0 Compliance costs in some instances would reduce under option 3, as there would be fewer transfer pricing disputes about debt. However, an rule would be a + Option 4 would reduce compliance costs somewhat, as the interest rate cap would be available as a safe harbour. Taxpayers not utilising the safe harbour will still be required to do a transfer pricing analysis (i.e. 0
2017-other-beps-16-ria-interest-july-2017.docx