Impact of COVID-19 on transfer pricing outcomes 

Covid-19 has had a significant impact during 2020 on profitability of businesses in a wide range of industries, followed by a need to manage transfer pricing implications. As the year is coming to an end there may still be a chance to consider the current positions, if needed; but most of all start focusing on making necessary changes to the transfer pricing documentation due to this extraordinary year.

COVID-19 effect on transfer pricing in brief


COVID-19 has forced many multinational enterprises (MNEs) to change the way they do business. While some industries have enjoyed a boom in 2020, several MNEs are experiencing significant disruption and change. Certain risks that may only have been allocated to entities contractually or operationally, have now materialised in an unforeseeable and unprecedented way. Against this backdrop, now is the time for MNEs to consider:

  • Adjust transfer prices proactively;
  • Review intercompany contractual arrangements;
  • Examine the underlying financial relationships between related parties;
  • Consider a price setting approach to determining transfer prices e.g. how to reflect COVID-19 in benchmarking studies and economic analysis;
  • The materialization of unexpected risks and the impact on functional, asset and risk profiles
  • Economic slowdowns may lead to business restructuring;
  • As supply chains change, changes to functional and risk profiles should be considered;
  • The justification for (potential) profitability decreases or losses;
  • Consider proactively engaging with tax authorities to manage uncertainties.

The serious implications for many multinational groups’ transfer prices, analysis and documentation is yet another thing to consider especially implications for documenting a Group’s Transfer Pricing for 2020.



How can our experienced Transfer Pricing advisors assist you?

Our experienced advisors are ready to assist you in all aspects related to the Transfer pricing challenges you may face and especially those that have arisen as a result of the COVID-19 pandemic. In particular it is important to address the new challenges arising as a result of the pandemic, the consequent global downturn and its effect on businesses on a global scale. Deloitte’s expert advisors are here to support you in responding COVID-19 related transfer pricing challenges:

  • Planning – Revisiting pricing policies and anticipated results as well as developing a strategy based on anticipated results instead of waiting for year-end surprises. In the absence of FY20 financial results for comparable sets, Deloitte advisors can assist you in utilizing variety of alternative analysis (e.g. predictive modeling) on benchmarking comparable sets;
  • Implementation – Building robust mechanisms to collate and assess operational and financial data;
  • Manage – Documentation is key! MNEs must analyse, document, and keep evidence of changes to their business and the impacts of COVID-19, and address it in their transfer pricing documentation. Collecting the right evidence on a contemporaneous basis (and making timely adjustments to related party contracts), should diminish the risk of tax authority challenges. Deloitte’s Transfer Pricing Documentation Tool Digital Dox can manage and increase the efficiency of your documentation process;
  • Resolve -  Continue to gather real time evidence of the impact of COVID-19 and thus the commercial drivers for changes to business models. Tax authorities may have a more aggressive approach to audits post COVID-19.  Now is a good time to consider past and future interactions with tax authorities and develop a resilient controversy strategy.  

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