Transfer pricing during the Covid-19 crisis

Transfer Pricing

Where tax is payable in advance instalments, understanding the effects of the Covid-19 crisis on your transfer pricing policies, and adjusting your pricing accordingly, may be a priority for the group to continue trading while easing pressures on cash flow for the group to meet all its financial obligations.   

In some circumstances, more radical operational or structural reorganisations may be required to protect the global business, and these reorganisations may have a greater impact on your transfer pricing policies. 

This is a fast-moving environment, and during the length of the lock-down, tax authorities are focusing their efforts and resources on implementing Government incentives and programmes to support the economy and businesses. The enforcement procedures are, de facto, relegated to the background for the time being. This respite will be temporary, and businesses must maintain discipline in decision making and scrupulously document their actions (i.e. keep contemporaneous notes and records of the background to and the rationale for decisions, as well as their positive and negative outcomes). These businesses would be in a stronger position to prepare themselves and stand up to scrutiny from the tax authorities once normality resumes. This may occur in 12-24 months, or later still, once Covid-19 (hopefully) has long passed. No-one can predict how long this episode will last or when it will end but it certainly will. Businesses will be held accountable for their behaviours and actions during this unprecedented episode. 

In the landscape of changes taking place in businesses in response to Covid-19, there are some transactions which should demand immediate attention from a transfer pricing perspective and some which may perhaps be less urgent now, but will nonetheless still require review, consideration and the exercise of judgment at a later date:  

Closing remarks 

It remains to be seen how the closure of large parts of the economy will shape the way businesses react and change in the longer-term and what this means for transfer pricing policies. During this period of disruption, businesses should not, however, relax their discipline. They must retain audit trails of decision-making and ensure the potential implications of those decisions are not overlooked before proceeding. Despite the apparent or felt urgency to react, precipitation should be replaced by careful consideration and we are here to help you navigate through these difficult times. 

How we can help 

The Mazars transfer pricing team can assist you now by providing practical advice and support through this difficult period and assist you in preparing appropriate documentation. We can assist you to prioritise immediate actions and record keeping that will put your business in the most robust position to withstand scrutiny, as we emerge from the worst of this crisis.  

Get in touch

If you would like a member of our team to contact you, please contact us here.