Commentary on Sections Overview Overview
395.Balancing payments may be made following a transfer pricing adjustment and are not taken into account in computing profits and losses. These payments enable the result of a transaction between two connected persons to be adjusted so that the persons end up in a position they would have been in had they been taxed on the basis of their actual transaction.
396.Balancing payments may also be made in cases where a guarantee is given and there is a transfer pricing adjustment as a result of the operation of section 153. Here the guarantor makes a payment to the borrower in recognition of the fact that the guarantor has received the benefit of the interest deduction, thus restoring the cash position to its original state.
397.The disadvantaged person or guarantor may alternatively elect to pay the additional tax incurred by the advantaged person following a transfer pricing adjustment.