• Benjamin Brinch Skov
The purpose of this master thesis was to examine whether the interplay between the OECD TPG and the Covid-19 Guidance remedy the special TP challenges that Covid-19 have created for the MNE’s in applying the Chapter 1 and Chapter 6 of the OECD TPG, or if there is a need for extra guidance from OECD on some of the challenges.

The OECD Covid-19 Guidance addresses several of the challenges that the MNE’s are facing during Covid-19. This includes issues regarding renegotiation of a contract, the importance of the accurate delineation of the transaction, that low-risk companies can generate a loss, it addresses extraordinary Covid-19 costs and how they should be distributed between the companies in the MNE, but not how large a part of the costs that low-risk companies can carry. The guidance also addresses that Governance Assistance Programs should be compensated if they are a significant economic factor. It addresses how the MNE’s should act regarding existing APA’s and APA’s under negotiation and the importance of APA’s. The challenges regarding APA’s are covered by the guidance. The MNE’s need more specific information regarding price adjustment mechanisms, which is just briefly touched by the Covid-19 Guidance.

The MNE’s need more guidance reading force majeure clauses based on Covid-19, how the remuneration for low-risk companies should be under Covid-19, more guidance reading Governance Assistance Programs and how these should be included in the comparability analysis, and how large a part low-risk companies can be allocated Covid-19 costs. They also need more specific guidance regarding Intangibles and the DEMPE-functions about how the positive or negative impact of Covid-19 should be taken into account, as the guidance just provides indirect guidance. A major challenge for the MNE’s is regarding the missing information on the independent companies in comparable transactions. The OECD Covid-19 Guidance address this issue, and give as a suggestion to this, that the companies can regulate the financial year 2020 in 2021 with a year-end adjustment. This is not allowed by the Danish law. This major issue isn’t solved for the Danish MNE’s and this is a major challenge for the exercise of the comparability analysis.

With the knowledge from the master thesis, the special transfer pricing challenges that MNE’s are facing from Covid-19 are discussed in a fictive case involving an MNE doing a business restructuring. This explains the practical view of the impact of Covid-19 and the challenges that MNE’s are facing.

The Master thesis concludes that, the Covid-19 guidance remedy some of the special transfer pricing challenges from Covid-19 that the MNE’s are facing, but not all of them. There is a need for further guidance from OECD to the MNE’s regarding some of the special transfer pricing challenges they are facing during Covid-19 and this thesis have highlighted some areas where additional guidance is needed from OECD to give the MNE’s the best conditions to apply the Arm’s length principle.
Publication date19 May 2021
Number of pages59
ID: 412012753