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Financial Guarantees

Transfer Pricing aspects

Financial guarantee pricing: a background

The pricing of a financial guarantee must be in accordance with the arm’s length principle. Considering this, it is increasingly important for the tax and treasury teams of multinational enterprises to follow the guidance outlined in the OECD’s publication: Transfer Pricing Guidance on Financial Transactions: Inclusive Framework on BEPS: Actions 4, 8-10. This guidance was recently added as Chapter X of the 2022 OECD Transfer Pricing Guidelines.

Luxembourg is a member of the OECD and follows the OECD Transfer Pricing Guidelines. Thus, to minimize the risk of being challenged by tax authorities, tax and treasury teams in Luxembourg-based companies must substantiate their decision-making process for each guarantee in place – even if a fee is not charged.

What to consider when dealing with financial guarantees

As a taxpayer, your biggest challenge will be delivering – and then documenting – an approach to assess the arm’s length nature of the financial guarantee. To determine if paying a guarantee fee is appropriate, you should consider the following questions:

How Deloitte can help


Deloitte has helped a broad range of clients to create a process and approach for delineating, pricing and documenting intra-group financial guarantee transactions. These efforts ensure that existing and new investment structures are more robust – so you’re ready for any tax authorities’ transfer pricing audits.

In addition to other services, we:

  • Assess whether it’s appropriate to charge a guarantee fee. We will consider the legal nature of the guarantee and other factors like: existence of implicit support, financial capacity of the guarantor, and the particular economic effect of the guarantee (in terms of benefit achieved by the borrower).
  • Determine, when applicable, the most appropriate transfer pricing approach to guarantee fees (i.e. CUP method, cost approach, yield approach, valuation of expected loss approach and capital support method).
  • Document in a memorandum the final results of the guarantee-fee pricing or the analysis sustaining why no guarantee fee should be paid.
  • Ensure compliance with local practices and regulations. In this respect, we have performed a global survey – across nearly 40 jurisdictions – that assesses how guarantees are treated for transfer pricing purposes.

Our global transfer pricing survey


In 2022, Deloitte conducted a transfer pricing survey within its global network. The feedback revealed interesting perspectives and practices in pricing financial guarantees across 37 jurisdictions.

Find out more about the results by clicking here and read our latest article on Intragroup financial guarantees.