Interesting Aspects of Transfer Pricing in Context with COVID-19

The COVID-19 brought uncertainty and instability, leading the states to adopt different measures (at the public health, social, labor, and fiscal levels, among others) that allow them to face the unprecedented effects of this new reality, which are still being studied.

The disruption of the world economy has left sectors affected and others hard hit (such as aeronautics, tourism, hotels and industry) which, together with the restrictions on the free movement of international cargo, has led to a slowdown in the processes of distribution and supply, leaving aspects that are now relevant to transnational business groups and to those heading towards internationalization (before COVID-19).

At present, economic agents are facing strong setbacks that have tested their resilience. One of the obstacles to be overcome is the undermining of solvency levels (which will surely be strengthened through:

  • The refinancing of previous loans, increasing their debt capacity and re-evaluating the circumstances and conditions of the current situation,
  • Factoring as a tool for short-term fluidity injection from a linked one,
  • By adding other types of financing sources such as new loans with competitive interest rates, incorporate centralized treasury services (improving the passive interests of the strengthened related parties and lower financial costs for the related parties due to liquidity).

Other obstacles are all those aspects related to transfer pricing policies, adopted and fully accepted prior to COVID-19 or those related to decreed guidelines for commercial interaction between related companies, such as:

  • Profit or loss location: Taking into consideration the development of an ex ante analysis and an ex post analysis of the functions, they can facilitate the identification of the incidence in the generation of the profit or loss of the business group.
  • New functions developed: The incorporation of technological assets that modify the cost structure, production processes or distribution channels, can favor the generation of new functions (temporary or permanent) that could, in their absence, develop intangible assets that have to be valued and paid in due time.

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