How the OECD guidance on the transfer pricing implications of the COVID-19 pandemic can impact the closing year-end 2021?

This is already the one-year anniversary of the  “Guidance  on  the  transfer  pricing  implications  of  the COVID-19 pandemic” (hereafter “the OECD Guidance”) issued on 18 December 2020.

As a reminder, the OECD Guidance represents  the  consensus  view  of  the  137  member states regarding transfer pricing issues that may arise in the COVID-19 context. Many factors may affect transfer prices and the amount of profits accruing to associated enterprises within a multinational enterprises group. COVID-19 pandemic was definitely one of those factors and led to practical challenges for the application of the arm’s length principle. The Guidance is helpful both for taxpayers and tax administrations[1].

The Guidance provides many clarifying comments on the practical application of the arm’s length principle in four priority issues in a 34 pages document:

  • Comparability analysis;
  • Losses and the allocation of COVID-19 specific costs;
  • Government assistance programs;
  • Advance pricing agreements (APAs) or ruling decisions.

As many enterprises are still in the closing process of reporting period ending on 31 December, we choose to take few examples out of the issues linked to losses and the allocation of costs[2].

There is a conclusive evidence that many MNE groups have incurred losses due to a decrease in demand, inability to obtain products or provide services or as a result of exceptional costs.

Three main issues are pointed out by the OECD:

  1. Allocation of losses between associated parties based on analysis of risks incurred in commercial / financial transactions

 The Guidance states that in determining whether or not a “limited-risk” entity may incur losses, the risks assumed by an entity will be particularly important. The Guidance gives an example, where there is a significant decline in demand due to COVID-19 (e.g. value of sales is insufficient to cover fixed costs), a “limited-risk” distributor (taking flash-title of the goods) that assumes some market risk may at arm’s length earn a loss associated with the playing out of this risk[3]. It’s crucial to keep consistence and coherence between the risk assumed and the loss incurred. Related parties should also consider to renegotiate their intercompany agreements where required.

  1. Allocation of exceptional, non-recurring operating costs arising as a result of COVID-19

The Guidance states that the allocation of operating or exceptional costs would follow risk assumption and how third parties would treat such costs. It should be noted that certain operating costs may not be viewed as exceptional or non-recurring in circumstances where the costs relate to long-term or permanent changes in the manner in which businesses operate[4].

  1. Option to apply force majeure clauses, revoke or otherwise revise intercompany agreements

The Guidance states that force majeure events arising in the context of COVID-19 could be the prohibition of activities by a governmental body, for example, through the enforced closure of retail facilities. Thus, a party may invoke that the extreme circumstances justify the non-performance of a contract and this may be achieved through the playing out of a force majeure clause (if any in the agreement). Tax administrations will also review the agreements and verify whether the transfer pricing outcome is appropriate taken into account the related transaction and circumstances[5].


We remain at your disposal to discuss how to apply those guidance to your particular situations. Those Guidance are bringing opportunities but also challenges and our best advice is to act carefully and document as much as possible any change to related intercompany transaction.

Do not hesitate to contact the person in charge of your file or to mail at for more information.

Tax Consult A&A


[1] It should be regarded as an application of existing guidance under the OECD Transfer pricing guidelines to fact patterns that may arise commonly in connection with the pandemic, but not as an expansion or revision of those guidelines.

[2] See full comments on p. 12-18, OECD Guidance.

[3] See point 40 of the OECD Guidance.

[4] See point 40 : OECD states that certain costs relating to teleworking arrangements may become permanent as a result of the pandemic. If teleworking costs are centrally borne by one entity of the MNE group, it may be appropriate to charge out such expenses to parties that benefit from the underlying product or service to which the expense relates.

[5] See point 55-59 OECD Guidance.


Dear Clients,

In the frame of the Coronavirus pandemic, the implementation of the activities of taxable persons is disrupted. The authorities and, more particularly the VAT Administration, have taken various measures to support businesses.

You will find below the main categories of measures adopted in the field of VAT.



The VAT Authorities have postponed the filing dates for monthly and quarterly VAT returns, special VAT returns, the annual list of taxable customers and intra-Community listings.

[Read more…]


The VAT Administration has also provided for a postponement of the deadlines for the payment of VAT due as a result of the filing of VAT returns but also a set of measures enabling taxable persons to overcome financial difficulties (cash flow, solvency, …).

[Read more…]


For protecting its staff and those involved in VAT audits that are ongoing or planned in the coming weeks, the Authorities have taken various measures to allow remote VAT audits or postponement.

[Read more…]


The VAT Authorities have taken various measures to ensure useful monitoring of obligations, whether they are related to a specific sector (alcohol trade, exports) or directly due to the context of the Covid-19 pandemic (for instance, right to deduct for donations maintained).

[Read more…]

Tax Consult follows daily the news of the measures taken by the Tax Authorities and is regularly in contact with the VAT Authorities.

If you have any questions, please contact your key-manager or directly the VAT department to check which measure could apply or to receive advice that suits your situation.

Best regards,
Tax Consult 


Giving the most recent measures taken by Member States affected by the Coronavirus, practical arrangements relating to the exercise of a professional activity are disrupted.

In this context, we have contacted the competent authorities and received the confirmation that the generalized homeworking will not be taken into account for the determination of the applicable social security scheme (EU Regulation nr. 883/2004). The reference period goes from March 13, 2020 to April 5, 2020.

This position applies to both employees and self-employed persons.

From a practical perspective:

  • Secondment – The social security scheme of the country of origin remains applicable (article 12)

In case of homeworking, all secondment conditions will be fictively deemed as fulfilled.

  • Simultaneous activities (article 13)

During the reference period, homeworking will not be taken into consideration for the substantial activity condition (i.e. 25% rule).

The European authorities have not made yet any statement in this respect. However, there seems to be a consensus between Member States regarding the application of the above-explained tolerance.

We can only welcome this decision and we are grateful to the competent authorities for their prompt reaction on this matter.

If you have any questions or query, please do no hesitate to “>contact us.



The Tax Authorities have recently taken additional measures regarding filing and payment obligations to enable businesses to overcome financial difficulties that would be encountered as a result of the spread of the Coronavirus.

1. Postponement of the deadline for the submission of Corporate income Tax, Legal entity Tax and Non-resident corporate Tax returns with an initial dea-dline of 16 March to 30 April 2020 included
2. Extension of the deadline for submitting VAT returns
3. Payment of VAT and withholding Tax
4. Payment of personal and corporate income tax?

Tax Consult S.A. – March 2020


An automatic deferral of 2 months without surcharge or interest is granted for the payment of VAT and withholding tax. The same applies to taxation of individuals or companies established as from 12 March 2020. The Tax Authorities have also taken specific measures to enable businesses to overcome finan-cial difficulties that would be encountered as a result of the spread of the Coronavirus.

1. Which companies could benefit from these measures?
2. Which tax debts are concerned?
3. What are the measures planned by the Tax Authorities?
4. What are the conditions to benefit from these measures?
5. The steps to be taken

Tax Consult S.A. – March 2020