On January 8th, 2021, the transfer pricing team of KPMG Meijburg & Co held a webcast to go through the “Guidance on the transfer pricing implications of the COVID-19 pandemic” (Guidance) published by the OECD on December 18th, 2020. During this session, we gave our perspectives and insights on the four priority issues covered by the Guidance:
- Losses and the allocation of COVID-19 specific costs;
- Government assistance programs (such as the NOW in the Netherlands);
- Comparability analysis; and
- Advance pricing agreements (APAs).
While the Guidance addresses these four challenging issues raised by COVID-19 for transfer pricing, no one size fits all solutions are given, as every individual situation of taxpayers may differ, depending on relevant facts and circumstances, and functional analysis in particular. However, the Guidance does provide very useful considerations for companies when dealing with specific transfer pricing issues arising from the COVID-19 pandemic. The Guidance also encourages pragmatism and calls for flexibility in cases disputes between tax authorities and taxpayers would arise.
From a transfer pricing perspective, any consistent roadmap to face the challenges of the COVID-19 pandemic should typically include an assessment of the overall business impact of the COVID-19 pandemic, the possibilities for transfer pricing adjustments, the identification and gathering of supporting comparability data, review of contractual arrangements and APAs in place, substantiation and documentation of tax positions taken and an assessment of the likely impact of restructuring and policy changes.
For more information, contact a transfer pricing professional from KPMG Meijburg & Co.