In connection with the SARS-CoV-2 pandemic, many companies are confronted with problems such as reduced income, production downtime, delays in the supply of materials and raw materials, insolvency of contractors, etc.
In practice, this may lead to situations where the supply chain in transactions with related parties has to be reorganised due to the temporary closure of the plant, lack of staff, the need for longer storage of goods due to lack of transport capacity, etc.
These aspects may have a significant impact on the transfer prices agreed in settlements with related entities, for example by changing the distribution of functions, assets and risks between the various parties to a transaction. In addition, changes in the method of settlement between related parties, extensions of payment terms, distribution of payments in instalments, etc., may in turn require verification that the method and calculation method used corresponds to arm’s length principle.
Given the fact that:
- in certain cases it is important to apply arm’s length principle already during the year,
- significant changes in commercial or financial relations may be treated as restructuring covered by transfer pricing regulations
we suggest that you analyse your transactions from the transfer pricing perspective.
Author: Magdalena Stefaniak – Odziemska, tax consultant