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Optimizing Losses from a Transfer Pricing Perspective in the Wake of a Pandemic

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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.

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Thomas Brennan is an Economist in Baker McKenzie Sydney office.

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Koji Oshima is experienced in international tax and transfer pricing matters. Prior to joining Baker McKenzie in 2008, he worked for Deloitte Touche Tohmatsu.

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Jeanne Chenard-Soucy is a senior economist in Baker McKenzie’s Palo Alto office. Jeanne focuses on valuation, transfer pricing and controversy support. She advises clients on a wide range of matters such as business enterprise and intangible asset valuations and a broad range of transfer pricing issues related to cost-sharing arrangements, restructuring intercompany arrangements for tax planning, preparing US and foreign documentation, valuing intangible assets and audit defense.

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Christopher (Chris) S. Raybould is the Canadian Transfer Pricing Practice Leader and Director of Economics for Baker McKenzie in Toronto and previously served as a member of the firm’s North American Transfer Pricing Steering Committee. Mr. Raybould handles transfer pricing advisory work in various capacities. He advises on and assists in negotiating advance pricing arrangements, pursuing competent authority assistance, provides audit defense representation, appeals support, and Transfer Pricing Review Committee representation. He also advises on a variety of other types of transfer pricing projects, including BEPS related advice, risk identification and assessment, planning and compliance studies, and assists with the transfer pricing aspects of business conversions and restructurings, acquisition due diligence and integration. Mr. Raybould has extensive experience in a number of industry sectors including automotive, pharmaceutical, food, financial investments and products, manufacturing, consumer businesses, technology, and commodity-based businesses. Mr. Raybould is an author on transfer pricing issues and a frequent speaker.

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Stephanie's practice focuses on the Canadian tax aspects of corporate mergers, acquisitions, divestitures, reorganizations, financings and other tax planning in both the international and domestic contexts. Stephanie has particular experience advising on Canadian tax issues affecting multinationals with operations in Canada, including inbound structuring, cross-border employee mobility, withholding tax, and tax treaty issues, and on matters relating to executive compensation. Stephanie has industry specific experience in sectors including technology, media and telecommunications, energy, mining and infrastructure, and consumer goods and retail.

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Alfonso Sancho joined Baker McKenzie Madrid in 2014 from a Big Four firm where he worked at the International Tax Services and Transfer Pricing Department. He is a tax lawyer and a transfer pricing professional.

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Yukiko Komori is a member of the Firm's Tax & Transfer Pricing Group in Tokyo. She has more than 20 years' experience advising clients on a broad range of transfer pricing issues. She has strength particularly in advance pricing agreements (APAs) and tax planning for new types of businesses and transactions. She has also been part of research projects for various organizations, including the National Tax Agency and the Ministry of Economy, Trade and Industry.

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Ivan Tsios is a director of economics in the Chicago office. He focuses on valuation, transfer pricing, and financial/statistical analysis. He has assisted multinational corporations with business enterprise and intangible asset valuations and a broad range of transfer pricing issues, including planning intercompany pricing, documenting tangible, intangible, and services transactions, negotiating advanced pricing agreements, restructuring intercompany arrangements for tax purposes, intellectual property transfers, and audit/controversy support.

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Steve Labrum joined Baker McKenzie's transfer pricing practice in 2016. He has twenty years of experience working for Big Four accounting firms, including seventeen years as a partner and as Global Head of Financial Services Transfer Pricing. Steve has also worked in the banking industry for five years.

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Alejandro Zavalais is a Legal Director in Baker McKenzie’s Amsterdam office. Prior to joining the European transfer pricing team in 2015, he was part of the Firm's Mexican transfer pricing and valuation group, working for five years with multinational companies operating in Latin American countries and the US.

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Allan advises on transfer pricing, with an emphasis on economic analysis. He has considerable experience in matters involving planning, compliance, valuations and audits in Mexico. With over a decade of experience as an economist, Allan worked for over two years in the Firm’s New York office, where he was involved in a large number of compliance and planning projects.

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