Tax Insights June 2020 - Coronavirus (Covid-19): potential impacts on transfer pricing

The spread of the coronavirus has a far-reaching impact on business and society all over the world. Countries have taken extensive measures to fight this virus. As several of these measures entail countries closing their borders, international business has become very difficult, if not impossible. A good example is international business travel leading to change in decisions-making. As a result, the working pattern and work location of several employees and self-employed workers have changed due to this crisis. In this newsletter we inform you on how this may affect transfer pricing and how this may impact international taxation. 

We would like to point out three main important points relating to Covid-19 and transfer pricing. 

The first point is about risk management function. 

We are of the view that the risk management function should be aligned with the current transfer pricing policy of the group. Due to this health crisis, some businesses may be concerned that their risk management function can be assumed by a company that in a normal situation will not be assuming this function. This leads to a situation when it must be assessed whether this function is changing or not. Moreover, it should also be assessed whether this health crisis is pushing the group to empower a specific local entity. 

We recommend recording the main economic decisionmakers as a response to this major crisis. Reference is made here to responsible specific teams in the group. 

A second point, as a continuation of the first point, are the significant people functions. 

It must be assessed whether: 


  • Changes are applied in significant people functions.
  • Remote working or home offices of significant people can lead to reviewing transfer pricing policy or other potential risks, as for example the permanent establishment question. 

Regarding the permanent establishment question, and as it is has been tackled by the OECD on its “OECD Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis”, it is “unlikely that the COVID-19 situation will create any changes to a PE determination. The exceptional and temporary change of the location where employees exercise their employment because of the COVID-19 crisis, such as working from home, should not create new PEs for the employer. Similarly, the temporary conclusion of contracts in the home of employees or agents because of the COVID-19 crisis should not create PEs for the businesses”.  However, is this thinking applicable if this crisis goes on and persists? 

Finally, we would like to draw your attention on rulings that have been concluded or are in processing, that a review of the facts should be done. Indeed, the profitability amongst other things may be affected and impacted by the Covid-19 crisis. 

We strongly recommend to companies requesting a ruling to enter into discussions with the Belgian tax authorities to assess whether changes or revisions can be applied, whether some deviations from the perspective can be accepted, whether the data provided is still applicable and relevant and as a whole if it is still valid. 

We are of the view that it is the best time to challenge all these different points and to take actions if relevant.

If you want more information about this, or any other assistance, the RSM Belgium tax team is at your disposal: [email protected].


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