The OECD has published new guidance for tax administrations and businesses on the application of transfer pricing rules during the coronavirus pandemic. In a client briefing, DLA Piper observed the following points from the new guidance:
Legal agreements are the starting point when examining the impact of the COVID-19 pandemic.
It cannot be presumed that the pandemic would change the pricing in a controlled transaction; however, where the arm’s length price is determined on an annual basis, it will be necessary to perform a comparability analysis for the specific years affected by the pandemic.
A practical approach should be adopted to contemporaneous documentation.
The documentation should be taxpayer and transaction specific.
Limited risk entities may incur certain covid-19 losses and bear specific pandemic costs.
Impact of government assistance would have to be analysed.
Engage proactively with tax authorities on existing APAs and ongoing APA negotiations.
The OECD has published new guidance for tax administrations and businesses on the application of transfer pricing rules during the coronavirus pandemic. In a client briefing, DLA Piper observed the following points from the new guidance:
Legal agreements are the starting point when examining the impact of the COVID-19 pandemic.
It cannot be presumed that the pandemic would change the pricing in a controlled transaction; however, where the arm’s length price is determined on an annual basis, it will be necessary to perform a comparability analysis for the specific years affected by the pandemic.
A practical approach should be adopted to contemporaneous documentation.
The documentation should be taxpayer and transaction specific.
Limited risk entities may incur certain covid-19 losses and bear specific pandemic costs.
Impact of government assistance would have to be analysed.
Engage proactively with tax authorities on existing APAs and ongoing APA negotiations.
