There are recommendations on the impact of COVID-19 on transfer pricing
The Ministry of Finance has published draft recommendations of the Transfer Pricing Forum (FCT) on the impact of Covid-19 pandemic on transfer pricing for Polish taxpayers. The document is 74 pages long. Comments to it can be submitted until the end of July.
– The impact of the pandemic on transfer pricing was discussed at the 12th Transfer Pricing Forum held in June. Now the Ministry of Finance has published a draft recommendation of the FCT. The document refers to controlled transactions where the impact of the pandemic on transfer prices was identified. Included are: the determination of the impact of the pandemic on the comparative analysis, losses and allocation of extraordinary costs of the pandemic, the treatment of anti-crisis support, the impact of the pandemic on pricing agreements (APAs), documentation of the effects of the pandemic and the issue of the burden of proof – points out Cyprian Werykowski, tax advisor, director at Thedy & Partners.
The recommendations emphasise that COVID-19 may have had both a negative and positive impact on the taxpayer’s activity, and this impact may occur both in relation to the controlled transaction itself and to the market or industry in which the entrepreneur operates.
– It must be remembered, however, that during a pandemic the existing principles set out in the OECD Guidance still apply to assist taxpayers and tax administrations in determining and verifying transfer pricing. Guidance C-19 recognises a pandemic as a hazard risk. Hazard risk may manifest itself through the materialisation of costs or risks incurred by the parties to a controlled transaction. Importantly, and as the document points out, a pandemic does not automatically change the historical distribution of risk between the parties to the transaction. Analysing risks (determining which risks materialised) during a pandemic and indicating to which party to the transaction these risks were historically assigned before the pandemic plays a fundamental role in deciding to which party to the transaction to assign the effects of pandemic C-19 – Cyprian Werykowski emphasises.
The recommendations will not apply to changes in the terms or circumstances of controlled transactions that arise for reasons other than those triggered by the pandemic.