The Covid-19 pandemic, among other negative consequences, has caused practical difficulties in the application of transfer pricing rules given the economic circumstances of the crisis and the redefinition of business strategies by multinational groups.
The latter have found it necessary to restructure their intra-group transactions in order to continue their operations, in some cases this could lead to tax risks under international transfer pricing standards.
The problematic application of transfer pricing rules by multinational groups and tax administrations in the context of Covid-19 focuses on the following factors: comparability analysis, the impact on government assistance programmes, loss attribution and extraordinary cost deductions, and advance pricing arrangements.
These four factors were addressed by the OECD within the Inclusive Framework of the OECD/G20 BEPS Project in its report "Guidance on Transfer Pricing Implications of the Covid-19 Pandemic" published on 18 December 2020.
The OECD Transfer Pricing Guidelines in the context of Covid-19 note that, with regard to the comparability analysis, difficulties may arise with the delimitation of transactions to be supported by the 2020 supporting documentation, in this sense, if there are inconsistencies in the delimitation of transactions for the comparability analysis, it is likely to generate a tax controversy.
Furthermore, the OECD Transfer Pricing Guidelines in the context of Covid-19 address the challenges in the search for comparable transactions in the current economic circumstances, highlighting that the problems in comparability analysis are increasing in the context of the crisis.
In addition, the OECD Transfer Pricing Guidelines note that, in the current circumstances, problems may also arise with the sources of information for the 2020 transfer pricing analysis at the time of the arm's length analysis, given the limited availability of information for the 2020 period.
Full note at: https://elcapitalfinanciero.com/los-precios-de-transferencia-en-el-contexto-del-covid-19-parte-i/
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