Exceptional Corona circumstances allow you to apply exceptional transfer pricing (adjustment) measures

Reading time: 1 minute | March 25, 2020 | by Hank Moonen

Many multinationals operate a centralized (principal) transfer pricing model with an entrepreneurial entity and low-risk distributors, commission agents, promotional support offices, service providers and contract manufacturers, contract R&D, or software development worldwide. Those routine entities expect to earn a small but stable profit margin or net profit mark-ups. However, this margin is commonly expected to be earned under normal business circumstances.

 

During the coronavirus crisis, companies are far removed from normal business circumstances that could justify lower than usual profit margins or even a loss. Whether tax authorities around the world will fully agree to such argumentation immediately cannot be guaranteed. Discussions along this line were already successful during the financial crisis a decade ago. Thus, it can be important that taxpayers quantify and document the extraordinary business impact of the COVID-19 crisis as support for argumentation for the tax authorities—for instance, deviations between initial budgets and actual figures per legal entity.

 

In case you would appreciate any pragmatic support in terms of (financial) impact analysis, extraordinary documentation, or just for a brainstorm, please contact me directly via phone: +31 (0)6 53 90 74 50 or send me an email: hank.moonen@tax-model.com.

 

Stay safe & in good health!

 

Hank Moonen
CEO