EDF-X for Transfer Pricing

An efficient and transparent solution for credit risk assessment and arm’s length interest rates of financial transactions

Key risks Transfer Pricing and Tax professionals are navigating

Regulatory impacts and focus on closing the “Tax Gap”

Tax authorities worldwide have been paying increased attention to intercompany financial transactions due to the OECD’s (Organisation for Economic Cooperation and Development) focus on BEPS (base erosion and profit shifting) efforts. OECD has released detailed guidance on financial transactions, which is being implemented globally. Closing the “Tax Gap” is a priority for tax authorities, who are investing in resources to reduce budget deficits and build trust in the tax system.

It is more important than ever to ensure that the credit risk score and interest rate of an intercompany loan align with OECD transfer pricing guidelines. Doing so will help mitigate the risks of audits, financial penalties, double taxation, and damage to reputation.

How Transfer Pricing and Tax professionals can avoid risks and stay in compliance with OECD guidelines

Our innovative approach provides unparalleled data insights and transparency

With over 50 years of experience in modelling credit risk, we offer objective credit risk insights, along with comprehensive financial transaction data for arm’s length benchmarking.

  • Compliant with OECD guidelines Chapter X (General Considerations, Effect of Group Membership, Determining the Arm’s Length Interest Rate)
  • 450+ million public and private, rated and unrated companies
  • 200+ countries and territories covered
  • Clear methodology for your transfer pricing documentation

EDF-X turns the value of our data into action, enabling you to make better transfer pricing decisions

Complying with regulations and avoiding financial risks can be a daunting task. It’s never been easier to accurately determine a credit risk score and market interest rate for an intercompany loan.

Multinational Enterprises and Tax Advisory Firms

  • Determine fair, competitive interest rates/price for all intercompany transactions
  • Assess standalone company credit risk
  • Consider presence of implicit support
  • Incorporate qualitative factors
  • View median credit spreads
  • Benchmark by industry, geography, asset class, credit risk, and more

Tax Authorities and Governments

  • Use of transparent, time-tested credit risk modelling methodology
  • Access to detailed financial data and credit worthiness of public and private entities globally
  • Clear and accurate determination of intercompany relationships
  • Review of parent entity’s financial health to assess whether the parental support on credit worthiness of the subsidiary was positive, negative or neutral
  • Assess multiple interest rate scenarios and other qualitative factors for subsidiaries and affiliates
  • Review arm’s length comparable entities to calculate profit level indicators and fair pricing

How Transfer Pricing and Tax professionals can adopt best-practice credit assessment and benchmarking tools

Game-changing automation and efficiencies – so you can replace guesswork with a results-driven approach

EDF-X is easy to use, customizable and has industry-leading coverage, so you can enhance your transfer pricing process.

  • Automated credit risk measures including Probability of Default (PD), Loss Given Default (LGD), Expected Loss (EL), and implied ratings for any company in the world
  • Comprehensive financial transaction data for arm’s length benchmarking
  • Median credit spreads to create reference interest rates and convert to local currency
  • Factor in potential future financial insights that may impact a company’s credit risk

What clients are saying about EDF-X

"We are not in the credit rating business. Moody's makes our job easier because we can point to their results and let tax authorities know that this implied credit rating came from a reputable firm that specializes in credit risk assessment."

– Manager, Transfer Pricing Practice