Technical update:

Immediate and Medium-Term Cash Tax Responses to COVID-19 through Transfer Pricing

11 May 2020

The COVID-19 crisis has caused otherwise financially stable organisations to experience declines in profitability due to falling revenues not offset by cost reductions.

The economic impact of COVID-19 may also lead to international businesses failing to meet cash obligations for corporate tax instalments and tax liabilities. Global business models are often structured to allocate a fixed level of profit to parts of the supply chain and therein commit to pay some taxes in good times and bad.

BDO Global recently hosted a webinar (May 5th) to debate how transfer pricing might be the cause of and solution to cash tax concerns for business arising from COVID-19. Extreme disruption to global demand, the workforce and supply chains means existing transfer pricing approaches may cause businesses to be liable for cash tax payments that are not currently affordable. Immediate and medium-term solutions on taxes are necessary to ensure cash remains available for ongoing operations.

Key topics included:

  • Cash tax and liquidity needs in a global tax compliance calendar - how to manage immediate and longer-term cash tax effects during phases of the COVID-19 crisis
  • Different country approaches - implications of differing responses and reliefs available by governments to possible transfer pricing solutions
  • Supply chain disruption, extraordinary expenses, impact on APA's and other arrangements - special considerations using example business models and scenarios
  • Intercompany agreements - how can we apply different terms to a live contract to achieve a better tax outcome?

Speakers included BDO international Transfer Pricing Partners Zara Ritchie (Australia), Mark Schuette (US), Paul Daly (UK) and Dirk Elbert (Germany) who shared practical insights on these topics for international business during the COVID-19 crisis.

Key takeaway messages from the webinar and a copy of the recording are are provided below.

Key takeaways

Rewatch the webinar

At BDO, we are continually keeping up-to-date with measures being announced as part of the government’s response to Covid-19. Visit our dedicated Covid-19 hub to read our latest insights and for more information or download our toolkit to view the steps that your business might consider taking in the days and weeks ahead.

BDO Transfer Pricing Websites for Ireland and Global

Content adapted from BDO Global.