Covid Brings Transfer Pricing Issues

This article summarizes the essential role of inter-company agreements in transfer pricing compliance. Transfer pricing relates to the charges made between associated entities, such as companies within a group. Tax authorities may challenge the amounts of those charges, giving rise to a risk of double or multiple taxation of the same profits. The disruption caused by the Coronavirus pandemic has complicated transfer pricing issues for many companies, and this article includes a guide to scrutinizing and possibly revising inter-company agreements. A key concept is the “arm’s length principle,” which requires transfer prices to be determined based on conditions that would be made between independent or unrelated enterprises. “Intragroup agreements,” says the writer, “need to be considered from a holistic perspective- including considerations of regulatory compliance, VAT, customs duties, intellectual property licensing, and other asset protection – in addition to governance and transfer pricing. In-house legal functions have a vital role to play in managing these issues.”