New OECD Guide on TP under COVID
On 18 December, the OECD published the “Guidance on the transfer pricing implications of the COVID-19 pandemic”. The purpose of this report is providing guidance on the application of the general principles of the OECD’s transfer pricing guidelines to situations that commonly arise in connection with the pandemic. The guidance contains an extensive list of items that should be documented, such as analyses of sales volume and capacity utilization changes or government support received. Overall, these items do already make sense under normal conditions but are regularly absent in compliance-oriented documentations. The guidance also deals with timing issues in obtaining comparable data, a common issue with the ex-ante outcome testing approach that dominates transfer pricing practice internationally. A broad space is dedicated to the possible effects of government assistance which, as a characteristic of the local market, may have significant effects on the comparability analysis. The final chapter addresses the possible effects on Advance Pricing Agreements that – under certain conditions – may be faced with a breach of a critical conditions questioning their ongoing validity, possibly requiring adaptions.
The Guidance can be accessed on the website of the OECD here: https://www.oecd.org/ctp/transfer-pricing/guidance-on-the-transfer-pricing-implications-of-the-covid-19-pandemic.htm
New German TP Principles
On 3 December 2020, the German Ministry of Finance published new administrative principles for cross-border transfer pricing (“2020 AP”). These update the original administrative principles from 2005 and are binding for the tax administration. The 2020 AP mainly address the taxpayer’s legal obligations to cooperate with the tax administration and the methods to estimate the taxable income of the taxpayer and any penalties to be imposed.
One point to be kept in mind when working with the 2020 AP is that they do not completely replace the administrative principles from 2005. Rather, the sections of the older principles that handle topics not addressed by the 2020 AP remain in force. The 2020 AP – in German language – can be found on the website of the Federal Ministry of Finance here: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Weitere_Steuerthemen/Abgabenordnung/2020-12-03-Verwaltungsgrundsaetze-2020.pdf?__blob=publicationFile&v=3