International tax directors face the unenviable challenge of determining whether they should modify transfer pricing policies in the face of the economic downturn caused by the coronavirus (COVID-19) pandemic.
The business implications vary greatly by industry sector and geography. Moreover, while these tax directors need to make their decisions in real time, the profit margin data often used for setting or testing transfer prices is generally only available with a lag of five to six months for North American databases and up to 18 months for some foreign databases.
There are various factors and approaches that tax directors might consider when determining if their current target profit margins are appropriate during the COVID-19 disruption and, if not, how they might adjust those target margins consistent with the arm’s length standard.
Read a June 2020 report [PDF 157 KB] prepared by KPMG LLP: What’s News in Tax: COVID-19 and Transfer Pricing Policy: A Lookback Analysis of Routine Returns
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