Governments and central banks around the world are struggling to address the COVID-19 pandemic and its impact on the economy. While certain governments may mitigate the crisis by doing whatever it takes, businesses are still required to operate and transact with their international affiliates at arm’s length as prescribed by their local transfer pricing rules.
For many companies, the COVID-19 pandemic is causing important supply chain and operational disruptions, and is reducing system-wide profits. Despite governmental measures and stimulus, the financial impact may be even greater for parent companies of local subsidiaries operating as limited-risk distributors or service providers and earning a guaranteed return. Under the current circumstances, it may be appropriate to share losses among different members of a global group depending on functional profiles and where the economic risk is ultimately borne.
This article, part of Baker McKenzie and Bloomberg Tax’s Special Report, provides companies with practical tips and identifies issues that may need to be addressed given the uncertainty caused by the COVID-19 pandemic.