RSM India

White Paper: Analysis of Impact of COVID-19 on Transfer Pricing

The impact of COVID-19 outbreak and the subsequent restrictions on economic activity on account of lockdowns have been profound. Economies and markets have been hit by the COVID-19 outbreak, and businesses are making contingency plans to ensure their operations continue. The worldwide virus outbreak is causing substantial shifts in financial markets and the macro economy, with direct adverse implications on global supply chains and profitability.

Most of the multi-national enterprise (‘MNE’) have already started to analyse the effect on businesses, supply chain, production, other costs, target market, customers etc and which would have impact on Transactions between entities of such MNEs. The MNEs needs to carefully evaluate change in transfer pricing policies and methodologies considering the tax jurisdictions of enterprises. In this enclosed white paper we have tried to highlight some of key areas that should be actively reviewed and monitored from a Transfer Pricing (‘TP’) perspective, namely:

  1. Transfer Pricing Policies
  2. Business Restructuring or Reorganization
  3. Transfer Pricing Methodology
  4. Cash crunch and revisiting Inter group financial arrangements
  5. Stranded Research & Development and return on Intangibles
  6. Uncertainty on agreed or under negotiation Advance Pricing Agreements (‘APAs’)
  7. Limited Risk Entities
  8. TP Documentation under ‘Substance over form approach’
  • Contemporaneous Evidence Gathering
  • Functions Assets and Risks (‘FAR’) re-characterisation
  • Critical overview of Industry
  • Benchmarking with limited data
  • Selection of tested party
  • Transfer Pricing Adjustments
  • Group Master Fie (‘MF’) and Country by Country Report (‘CbCR’)  

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