The “Guidance on the transfer pricing implications of the COVID-19 pandemic” represents the consensus view of the 137 members of the Inclusive Framework on BEPS regarding the application of the arm’s length principle and the OECD Transfer Pricing Guidelines to issues that may arise or be exacerbated in the context of the COVID-19 pandemic. The guidance is helpful both for taxpayers in reporting the financial periods affected by the pandemic and for tax administrations in evaluating the implementation of taxpayers’ transfer pricing policies. The Guidance provides clarifying comment on, and illustrations of, the practical application of the arm’s length principle in four priority issues, identified in consultation with Business at the OECD: (i) comparability analysis; (ii) losses and the allocation of COVID-19 specific costs; (iii) government assistance programmes; and (iv) advance pricing agreements. The unique economic conditions arising from COVID-19 and government responses to the pandemic have led to practical challenges for the application of the arm’s length principle. For taxpayers applying transfer pricing rules for the financial years impactedby the COVID-19 pandemic and for tax administrations that will be evaluating this application, there is an urgent need to address these practical questions.The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 (“OECD TPG”) are intended to help tax administrations and multinational enterprises (“MNEs”) find mutually satisfactory solutions to transfer pricing cases and should continue to be relied upon when performing a transfer pricing analysis, including under thepossibly unique circumstances introduced by the pandemic.Accordingly, this guidance focuses on how the arm’s length principle and the OECD TPG apply to issues that may arise or be exacerbated in the context of the COVID-19 pandemic, rather than on developing specialised guidance beyond what is currently addressed in the OECD TPG. This guidance focuses on four priority issues: (i) comparability analysis; (ii) losses and the allocation of COVID-19 specific costs; (iii) government assistance programmes; and (iv) advance pricing agreements (“APAs”); where it is recognised that the additional practical challenges posed by COVID-19 are most significant.
