The analysis of the effect of government assistance on the price of a controlled transaction will take into account the allocation of the economically significant risks under the accurate delineation of the controlled transaction, the impact of the pandemic on the outcome of the economically significant risks, and the linkage between the type of government assistance and those risks. Based on the facts and circumstances, the impact of government assistance on the price of a controlled transaction, if any, would depend, among other things, on which party assumes the economically significant risks affected by the pandemic in the context of an analysis of the accurately delineated controlled transaction. In order to reach a conclusion, consideration also should be given to all the other comparability factors described in paragraph 74.
OECD COVID-19 TPG paragraph 77
Category: TPG2020 Guidance on the transfer pricing implications of the COVID-19 | Tag: COVID-19, Government assistance, Government interventions
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- OECD COVID-19 TPG paragraph 73The potential effect of the receipt of government assistance on the pricing of a controlled transaction will depend on the economically relevant characteristics of the transaction, following an accurate delineation of the controlled transaction and the performance of a comparability analysis. Therefore, it...
- OECD COVID-19 TPG paragraph 72The analysis of the receipt of government assistance as a local market feature may help to inform an analysis of whether its receipt affects the price of a controlled transaction. It may also be relevant when conducting a comparability analysis. However, the particular...
- OECD COVID-19 TPG paragraph 65The terms and conditions of government assistance programmes related to COVID-19 need to be considered when determining the potential impact of these programmes on controlled transactions and when comparing their effects with those of other pre-existing assistance programmes. For instance, a number of...
- OECD COVID-19 TPG paragraph 67Economically relevant characteristics that pertain to a controlled transaction should be evaluated: (i) when accurately delineating the controlled transaction; and (ii) to facilitate the comparison between the accurately delineated controlled transaction and comparable uncontrolled transactions, in order to price the controlled transaction.38 38...
- OECD COVID-19 TPG paragraph 74The economically relevant characteristics of the accurately delineated controlled transaction will help in determining the potential effect of the receipt of government assistance on the pricing of the controlled transaction, if any. For instance, some of the aspects to consider in analysing the...
- OECD COVID-19 TPG paragraph 9The unprecedented change in the economic environment following the outbreak of COVID-19 creates unique challenges for performing comparability analysis. The pandemic may have a significant impact on the pricing of some transactions between independent enterprises and may reduce the reliance that can be...
- OECD COVID-19 TPG paragraph 68The extent to which the receipt of government assistance is an economically relevant characteristic may vary. An example of where government assistance may be more economically relevant is the provision of a wage subsidy, a government debt guarantee or short-term liquidity support. In...
- OECD COVID-19 TPG paragraph 66In addition, there may be challenges in establishing the nature of government assistance received by potential comparables, given the different types of COVID-19 government assistance programmes, the practical difficulties to obtain detailed and reliable information and the delay in data availability. In this...
- 2018: ATO Taxpayer Alert on Mischaracterisation of activities or payments in connection with intangible assets (TA 2018/2)The ATO is currently reviewing international arrangements that mischaracterise intangible assets[1] and/or activities or conditions connected with intangible assets. The concerns include whether intangible assets have been appropriately recognised for Australian tax purposes and whether Australian royalty withholding tax obligations have been met. Arrangements...
- EU JTPF, March 2017, Report on the Use of Comparables in the EUIn March 2017 the JTPF agreed the Report on the Use of Comparables in the EU. The report establishes best practices and pragmatic solutions by issuing various recommendations for both taxpayers and tax administrations in the EU and aims at increasing in practice...
Related Case Law
- Denmark vs EAC Invest A/S, October 2021, High Court, Case No SKM2021.705.OLRIn 2019, the Danish parent company of the group, EAC Invest A/S, had been granted a ruling by the tax tribunal that, in the period 2008-2011, due to, inter alia, quite exceptional circumstances involving currency restrictions in Venezuela, the parent company should not...