OECD’s Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic

The Organisation for Economic Co-operation and Development (“OECD”) has released a much-awaited guidance report on the transfer pricing implications of COVID-19.

The OECD report aims to address the practical challenges for the application of the arm’s length principles. However, instead of developing a new or specialised guidance, it continues to recommend the
reliance of tax administrators and multinational enterprises on the use of existing arm’s length principles and the OECD’s Transfer Pricing Guidelines which was issued in 2017 (“OECD Guidelines”).

The OECD believes that most of the challenges that businesses are likely to encounter from COVID-19 disruptions would be by way of:

• the need for maintaining steady cash-flow positions;
• unpredictable swings in the ability to maintain or report profitability across group entities;
• severe disruptions to the supply chain including curtailment of operations in many instances; and,
• new measures that businesses have had to put in place for business continuity (like working from home, where this is a feasible option).

It is worth noting that while the OECD has addressed the COVID-19 issues under discrete topic headings, nevertheless it recommends that these could be interrelated and should be considered together within the framework of the OECD Guidelines where a transfer pricing analysis is being performed.

Click here to read our more detailed look at the OECD’s suggestions

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