Transfer pricing is a fundamental factor in the income tax returns of multinational groups, especially in these times of Covid-19.
Transfer pricing valuation is generally based on the "arm's length principle" or the arm's length principle according to the OECD Transfer Pricing Guidelines, which states that "Related Enterprises" should value their transactions between related entities as if they were independent parties for tax purposes.
The application of the arm's length principle brings some practical difficulties for both multinational groups and tax administrations, which are significantly increased in the context of the current Covid-19 crisis, specifically with regard to the comparability analysis (the characteristics of the goods or services, the functional analysis, the contractual terms, the economic circumstances, the business strategies), a central aspect for the application of the arm's length principle, which is necessary to accurately and reliably assess the transaction under analysis.