Transfer Pricing Challenges in 2020 Caused by the Covid-19 Pandemic

Frederik Nygaard Saxosen & Sandra Schilling Nielsen

Student thesis: Master thesis


The purpose of this master thesis is to analyze and assess whether OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax administrations from 2017 (TPG 2017) in cooperation with OECD Guidance on the transfer pricing implications of the COVID-19 pandemic (TPG Covid-19) is sufficient guidance for the Danish multinational enterprises regarding their transfer pricing analysis under the influence of the Covid-19 pandemic in the years 2020 and 2021.
The main focus in the master thesis is on the challenges the Covid-19 pandemic has on the comparability analysis, intangible assets and intra-group restructuring regarding transfer pricing.
The TPG Covid-19 Guidance contains four subjects, where the master thesis main focus will be on chapters 1-3. The TPG Covid-19 guidance addresses the overall tendencies which are problematic during the Covid-19 pandemic and offers some general recommendations to the MNEs in regard to their comparability analysis.
The master thesis analyzes and discusses how the comparability analysis is affected by the Covid-19 pandemic and concludes that no comparable uncontrolled transactions are available. The TPG Covid-19 guidance regarding this matter, focuses on flexibility in year-end adjustments, however, this goes beyond what is allowed under the Danish legislation.
The intangible assets may be affected by the Covid-19 pandemic, whether these are positively or negatively affected depends on the industry. It is in particular the assessment of the commercial use and valuation that the Covid-19 pandemic has affected. To assess this, the MNEs are advised to use all currently available data of the impact.
During the Covid-19 pandemic more internal contracts may have been revised, which can result in a restructuring. The TPG Covid-19 guidance advises the MNEs to carefully consider the commercial reasoning for restructurings and emphasize the skepticism of Tax administrations if the commercial reasoning is solely based on the Covid-19 pandemic and not supported by further transfer pricing documentation. Furthermore, it is concluded that a temporary shift in the effective place of management, does not result in a restructuring.
Based on the master thesis theoretical chapters the main points are discussed in a fictive business case, containing a restructuring including the transfer of intangibles. It exemplifies how the MNEs are affected by the Covid-19 pandemic and the impact this has on their remunerations at arm’s length principle.
The master thesis concludes that the Danish multinational enterprises are in need of additional Covid-19 transfer pricing guidance to ensure that they comply with the arm’s length principle in connection with the intangible assets and intra-group restructurings.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2021
Number of pages122