Transfer pricing challenges in applying the arm`s length principle and intangible property in the OECD transfer pricing guidelines, during the COVID-19 pandemic

Transfer pricing utfordringer ved overholdelse av armlengdeprinsippet og immaterielle eiendeler i henhold til OECD Transfer Pricing Guidelines under COVID-19 pandemien

Rustad, Elise Back

4. term

Business Administration and Commercial Law, Master

2020

70

Dette speciale undersøger, hvordan multinationale virksomheder (MNE’er) kan håndtere transfer pricing-udfordringer under COVID-19 i overensstemmelse med OECD’s Transfer Pricing Guidelines (TPG) 2017, kapitel I om armlængdeprincippet og kapitel VI om immaterielle aktiver. Formålet er både at vejlede MNE’er i praksis og at vurdere, om TPG giver tilstrækkelig vejledning under de ekstraordinære markedsforhold i 2020. Analysen fremhæver praktiske problemstillinger, herunder om lavrisiko-datterselskaber kan have COVID-19-relaterede tab, sammenlignelighedsudfordringer ved brug af historiske benchmark (tidsforskydninger), ejerskab og profitfordeling forbundet med DEMPE-funktioner, samt værdiansætting af immaterielle aktiver under høj usikkerhed, særligt ved brug af DCF-modellen. Den teoretiske gennemgang anvendes i en egenkonstrueret case med et dansk principalselskab og tre lavrisiko udenlandske datterselskaber, hvor pandemiens effekter og den danske aflivning af mink medfører en omstrukturering (lukning af produktion i Italien og etablering af ny produktion i Polen). Specialet konkluderer, at TPG på visse punkter ikke er tilstrækkelige til at guide MNE’er under COVID-19, især ved værdiansættelse af immaterielle aktiver med DCF, og anbefaler, at OECD offentliggør yderligere vejledning om de særlige transfer pricing-udfordringer under pandemien.

This thesis examines how multinational enterprises (MNEs) can address transfer pricing challenges during COVID-19 in compliance with the OECD Transfer Pricing Guidelines (TPG) 2017, Chapter I on the arm’s length principle and Chapter VI on intangible property. The aim is both to provide practical guidance and to assess whether the TPG offer sufficient direction under the extraordinary market conditions of 2020. The analysis highlights practical issues, including whether low-risk subsidiaries can incur COVID-19-related losses, comparability challenges from relying on pre-2020 benchmarks (time gaps), ownership and profit allocation linked to DEMPE functions, and the valuation of intangibles amid high uncertainty, particularly when using the DCF model. The theoretical insights are applied to a self-developed case featuring a Danish principal and three low-risk foreign subsidiaries, where the pandemic and Denmark’s mink cull trigger a restructuring (closure of production in Italy and establishment of a new production entity in Poland). The thesis concludes that the TPG are, in some respects, insufficient to guide MNEs during COVID-19—especially for valuing intangibles using DCF—and recommends that the OECD issue further guidance on pandemic-related transfer pricing challenges.

[This summary has been generated with the help of AI directly from the project (PDF)]

Transfer Pricing ; OECD TPG ; Transfer Pricing Guidelines

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