OECD issues guidance on transfer pricing implications of COVID-19 pandemic

OECD issues guidance on transfer pricing implications of COVID-19 pandemic

The guidance on transfer pricing implications of the COVID-19 pandemic represents the consensus view of the 137 members of the OECD Inclusive Framework on BEPS.

OECD issue guidance on transfer pricing implications of COVID-19 pandemicThe OECD has published a 30-page guidance on the transfer pricing implications of the COVID-19 pandemic.

The guidance – issued on December 18 – discusses the practical application of the arm’s length principle in four priority issues identified in consultation with Business at the OECD. These issues are: comparability analysis; losses and the allocation of COVID-19 specific costs; government assistance programmes; and advance pricing agreements (APAs).

Grace Perez-Navarro, Deputy-Director, OECD Centre for Tax Policy and Administration, wrote a blog stating that “while the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations continue to be relevant to help tax administrations and multinational enterprises find mutually satisfactory solutions to transfer pricing cases, further practical guidance was necessary to support its application during the crisis.”

Perez-Navarro added: “The availability of third-party information is at the heart of the application of transfer pricing rules. While the pandemic has exacerbated the limitations of available data, the Guidance provides pragmatic approaches to address information shortcomings on comparables.”

“We know that many businesses have been hit hard by the pandemic and may be making losses throughout their value chains. For these businesses, how their transfer pricing policies effectively allocate such losses and COVID-19 specific costs between associated entities is particularly important,” she wrote.

Perez-Navarro wrote that “the pandemic has also led to the unprecedented growth of government assistance programme, leading to questions around the factors that should be evaluated to determine whether receiving government assistance may affect transfer prices.”

“Another priority area laid out in the Guidance covers APAs, which remain as one of the key instruments to enhance tax certainty regarding transfer pricing. In that spirit, the Guidance encourages taxpayers and tax administrations to adopt a flexible and collaborative approach given the current economic conditions,” she continued.

According to Perez-Navarro, “the Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic responds to the need to address these practical questions and is an important part of the Inclusive Framework’s commitment to improve tax certainty, which remains at the top of the OECD’s agenda, and to create a more stable international tax system.”

The guidance represents the consensus view of the 137 members of the OECD Inclusive Framework on BEPS.


The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also  regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com