Disruptions caused by the COVID-19 pandemic and related Transfer Pricing issues may also have impacts on Advance Pricing Agreements (APA) and procedures. Taxpayers should carefully analyze the underlying critical assumptions and proactively address potential breaches.
The ongoing COVID-19 pandemic has had wide-ranging repercussions on the global economy. Many companies may be impacted directly in their value creation by business disruptions brought forward by the pandemic and public containment measures. At the same time, tax authorities are under pressure to raise tax income given gaps in public finance in the wake of business and social assistance programs. In the light of the ever-increasing focus of tax authorities on Transfer Pricing, multinational enterprises face significant challenges in applying the arm’s length principle under the current unique economic conditions created by the pandemic.
In December 2020, the OECD has released guidance on selected practical Transfer Pricing issues in the context of the COVID-19 pandemic. The guidance provides considerations on how the principles set out in the 2017 Transfer Pricing Guidelines should be applied in situations that taxpayers may face in the context of the pandemic.