Transfer pricing implications of the COVID-19 pandemic: New OECD guidance for tax administrations and business

Banner image: Shutterstock/Corona Borealis Studio

Like Comment

This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

Join the Forum Network for free using your email or social media accounts to share your own stories, ideas and expertise in the comments.


The COVID-19 pandemic is having a profound impact on our lives and livelihoods. The rapid spread of the virus has strained local medical infrastructures, led to restrictions on travel and social contact, and created unprecedented disruptions to the global economy.

Many enterprises continue to face significant cash flow constraints, requiring them to develop and implement strategies to conserve and generate cash. They have seen wide variations in their profits and have been forced to change how their business operate (e.g. working from home). In many jurisdictions, factories, mines, shops and restaurants have been constrained to close, at least temporarily, while in other industries, demand has merely shifted channels or even increased (e.g. the market for online videoconferencing services).

Meanwhile, the significance and speed of the economic impact of the virus has meant that  governments have been simultaneously providing fiscal and monetary support and introducing innovative measures to protect jobs, boost incomes and support liquidity. For businesses in 2020, the economic environment that they have faced has few parallels and unfortunately, it is likely to continue through 2021 and potentially even beyond.

The uniqueness of current economic conditions has led to practical challenges for taxpayers and tax administrations in applying and administering transfer pricing rules—which are used to calculate how much profit should be allocated among the different jurisdictions where an enterprise operates. For taxpayers, these challenges create increased uncertainty. For tax administrations, transfer pricing reviews and audits are resource intensive. For both, the risk and costs associated with disputes are high.

A number of tax administrations have consequently published domestic guidance on some of the transfer pricing implications of COVID-19. While this is an important first step in facilitating taxpayer  compliance and delivering greater tax certainty, the two-sided nature of transfer pricing means that only through a common agreed approach can tax administrations effectively enhance tax certainty for businesses operating across broders.

This is where the Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic published today has an important role to play. Representing the consensus view of the 137 members of the OECD/G20 Inclusive Framework on BEPS, it provides the much needed clarification and support for taxpayers and tax administrations as they evaluate the application of transfer pricing rules for the period impacted by COVID-19. While the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations continue to be relevant to help tax administrations and multinational enterprises find mutually satisfactory solutions to transfer pricing cases, further practical guidance was necessary to support its application during the crisis.

The availability of third party information is at the heart of the application of transfer pricing rules. While the pandemic has exacerbated the limitations of available data, the Guidance provides pragmatic approaches to address information shortcomings on comparables.

We know that many businesses have been hit hard by the pandemic and may be making losses throughout their value chains. For these businesses, how their transfer pricing policies effectively allocate such losses and COVID-19 specific costs between associated entities is particularly important.

The pandemic has also led to the unprecedented growth of government assistance programmes, leading to questions around the factors that should be evaluated to determine whether receiving government assistance may affect transfer prices.

Another priority area laid out in the Guidance covers advance pricing agreements (APAs), which remain as one of the key instruments to enhance tax certainty regarding transfer pricing. In that spirit, the Guidance encourages taxpayers and tax administrations to adopt a flexible and collaborative approach given the current economic conditions.

The Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic responds to the need to address these practical questions and is an important part of the Inclusive Framework’s commitment to improve tax certainty, which remains at the top of the OECD’s agenda, and to create a more stable international tax system.

For more information, visit:

Related topics

Tackling COVID-19 Tax

Whether you agree, disagree or have another point of view, join the Forum Network for free using your email or social media accounts and tell us what's happening where you are. Your comments are what make the network the unique space it is, connecting citizens, experts and policy makers in open and respectful debate.

Grace Perez-Navarro

Deputy-Director, OECD Centre for Tax Policy and Administration

Grace Perez-Navarro is the Deputy Director of the OECD’s Centre for Tax Policy and Administration. As such, she plays a key role in all of the OECD’s tax work including the tax challenges of digitalisation, the Base Erosion and Profit Shifting (BEPS) Project, improving international tax co-operation, tackling illicit financial flows, promoting better tax policies and engaging developing countries in OECD tax work. Since joining the OECD in 1997, she has held several key positions, including having led the OECD’s tax work on bank secrecy, e-commerce, harmful tax practices, money laundering and tax crimes, countering bribery of foreign officials, and strengthening all forms of administrative co-operation between tax authorities.