Recommendation of the OECD regarding the impact of COVID-19 on transfer pricing

At the end of 2020, the OECD published a guidance note on the transfer pricing implications of the COVID-19 pandemic. The goal of the guidance note was to clarify how the "arm's-length" principle and the OECD Directive on transfer pricing should be applied to problems related to the COVID-19 pandemic.

The OECD recommends to companies that when they analyse the impact of the pandemic on their transfer pricing they should also look into how and to what extent the pandemic has affected them and whether (and to what extent) their businesses were affected by other factors that were unrelated to the pandemic. The important thing is to examine what functions and risks had already been assumed by individual companies within a group before the pandemic. If such risks have not changed during the pandemic, then the principle of determining transfer pricing should not be changed either, if the rationale for doing so is solely the situation caused by the pandemic. Companies within a group should record their losses during the pandemic only to the extent that corresponds to the functions that they have fulfilled and risks they have borne.