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Transfer Pricing Strategies for COVID-19

Profit Level Indicators You Can Trust

Thank you for registering and attending our virtual event. Enjoy early access to our newest white paper: Profit Level Indicators You Can Trust

How do you know your PLIs are reliable? The devil is in the details.

Session One

The Impact of the Pandemic on Transfer Pricing

Broken supply chains. Stay-at-home orders. Falling demand in products and services. COVID-19 has impacted businesses in extraordinary ways. Some companies have benefitted, and others? Not so much. An erratic environment is hardly ideal for a practice that’s based on comparing intercompany prices with third-party comparablesSo, how do you handle benchmarking for fiscal year 2020CrossBorder Solutions’ Chief Economist Mimi Song has a few ideas. In this in-depth discussion, she’ll walk you through the problems that COVID-19 has created for transfer pricing benchmarking and offer expert strategies to handle them.

The Takeaways:

– Despite COVID-19, transfer pricing is still transfer pricing—it’s still about proving arm’s length prices through comparability.
– COVID-19 may throw off comparable data.
– If reliable comparable data doesn’t exist for 2020 benchmarking, think outside the box: Consider data from other economic downturns or companies in loss positions.
– Document COVID-19’s impact on the business and provide a corroborating analysis to demonstrate market conditions.
– Robust documentation is absolutely necessary—always document contemporaneously to avoid penalties. 
– Enlist technology to make benchmarking more efficient.

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Session Two

Intercompany Agreements: What You Need to Know Now

Intercompany agreements are an asset to any company—they’re there, after all, to protect you. COVID-19, however, has forced many companies to change arrangements and shift functions, assets, and risks due to unique Coronavirus impacts on each business. So, what do those agreements mean now? Do they still reflect your business goals? Operating models? And most of all, do they still offer your company protection? Michelle Almeida, director of tax at Virgin Pulse, in Providence, Rhode Island, demonstrates how easily intercompany agreements can become out of sync in catastrophic times. In this discussion, she, along with CrossBorder Solutions’ Chief Economist Mimi Song, offers expert strategies on how to make sure intercompany agreements align with your business and protect the company—even in extraordinary circumstances.

The Takeaways:

– Intercompany agreements are designed to protect companies.
– Intercompany agreements must align with the reality of the business to be effective—agreements should be revised to reflect the realities of transfer pricing COVID-19.
– Companies represented in intercompany agreements may be unable to fulfill their obligations due to conditions caused by COVID-19 pandemic
– They require routine reviews to identify functions that shifted as well as operational changes.
– COVID-19 may require contracts to be renegotiated, but contracts will have to be renegotiated at arm’s length, which means that taxpayers will have to prove that economic circumstances have forced independent parties to renegotiate their contracts, too.

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Session Three

Why Limited-risk Distributors Should Not Share in COVID-19 Losses—A Minority Opinion

COVID-19 has raised many seemingly unanswerable questions throughout the last year. In terms of transfer pricing, how to handle limited-risk distributors is one of the biggest. Can they share in losses? The OECD says, maybe. Former SKAT agent Johann Müller says, no. Hear why he thinks these low-risk entities should be protected in this riveting discussion with CrossBorder Solutions’ Chief Economist Mimi Song. 

The Takeaways:

– Expect heightened scrutiny on losses for 2020, as local tax authorities will argue that they should remain outside of their jurisdictions.
– The OECD doesn’t recommend a general rule in terms of limited-risk entities absorbing losses.
– The accurate delineation of a transaction determines what is most appropriate.
– Any losses absorbed by limited-risk distributors should correspond with risk assumed by that entity.


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Session Four

How COVID-19 Affects Lending Arrangements

If the pandemic has scrambled your intercompany funding arrangements, you are not alone. Unprecedented volatility in financial markets has created unprecedented uncertainty in transfer pricing and, perhaps, an even greater need for intercompany lendingBut the search for arm’s-length interest rates and guarantees is now harder than ever. Do your lending arrangements need re-considering? And where are the hidden risks most likely hiding? CrossBorder Solutions’ Transfer Pricing Senior Manager Kerry Myford and Chief Economist Mimi Song are here to talk you through it.

The Takeaways:

– Cash-flow relief comes with increased compliance burdens during the pandemic.
– Expect more scrutiny on financial transactions.
– The pandemic has made fair-market interest rates and credit worthiness are harder to ascertain.
– Restructuring debt could help, but you’ll need to find third-party comparables that demonstrate how the practice reflects the market.
– Robust documentation is key.

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There's always more to learn

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