OECD Guidance on Transfer Pricing and International Tax implications of the COVID-19 Pandemic

On 18 December 2020, the OECD issued guidance on the implications for transfer pricing of the COVID-19 pandemic. They then issued guidance analysing the impact of the pandemic on the interpretation of international tax treaty provisions on 21 January 2021.

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On 18 December 2020, the OECD issued guidance on the implications for transfer pricing of the COVID-19 pandemic. They then issued guidance analysing the impact of the pandemic on the interpretation of international tax treaty provisions on 21 January 2021.

The Guidance released in December will inform how taxpayers prepare their upcoming transfer pricing documentation, make adjustments in FY2020 accounts or returns, and negotiate / implement APAs; while the one released in January analyses the creation of permanent establishments (PEs), changes in residence for entities and individuals, as well as the application of tie-breaker rules to dual residents and finally, income from employment.

There is a clear emphasis for both taxpayers and tax administrations to consider pragmatic approaches and for tax administrations to acknowledge where taxpayers are making good faith efforts to determine arm’s length prices under unusual circumstances.

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