Changes being made to transfer pricing policies in a coronavirus (COVID-19) environment are coming under closer scrutiny by the Australian Taxation Office (ATO).
The ATO on 19 June 2020 released the following guidance items: COVID-19 economic impacts on transfer pricing arrangements and Changing related-party arrangements.
The guidance provided by the ATO addresses how to evidence the impact of COVID-19, and the approach is aligned with how the ATO’s advanced pricing arrangements (APA) unit is looking to proactively address the impact of COVID-19 with taxpayers in “real time.” The new guidance follows earlier guidance on thin capitalisation and COVID-19, in which the ATO highlighted the option to use more frequent valuation points to smooth the COVID-19 impacts on balance sheets.
The ATO has indicated that it would not apply compliance resources when certain taxpayers exceeded their safe harbour debt limit due to COVID-19 and are required to use the “arm’s length debt test” approach to justify their pre-COVID-19 debt amounts and/or any short-term debt facilities required.
The ATO’s transfer pricing and COVID-19 guidance, among other things, provides the following.
With the ATO signaling a continued focus on transfer pricing, it is important that taxpayers continue to determine that any changes to their transfer pricing arrangements are appropriately considered, supported by contemporaneous evidence, and documented using transfer pricing principles accordingly.
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Australia:
Tim Keeling | +61 2 9455 9853 | firstname.lastname@example.org
Tony Gorgas | +61 2 9335 8851 | email@example.com
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