Transfer pricing aspects to be considered in the context of the state of emergency generated by COVID-19

Please find below several key points that should be taken into consideration, from a transfer pricing perspective, by Romanian entities that are part of multinational groups:

• Is the group as a whole registering losses due to the COVID-19 lockdown?;
• Is the local entity incurring losses due to the disruptions caused by the COVID-19 lockdown?
• What is the functional profile of the local entity and are the losses in line with the functional profile of the entity?
• Can the local entity still apply the profit margins agreed with the group before the COVID-19 lockdown?;
• Based on the OECD Transfer Pricing Guidelines, limited risk or routine entities should be entitled to at least a break-even position with no losses incurred. Are these recommendations applicable in the current context?;
• Can the current extraordinary circumstances lead to loss sharing in the group’s supply chain, even among limited risk service providers/distributors or low-risk contract manufacturers?;
• What would be the appropriate method to share the loss registered by the group with the local entity?;
• How should local entities document the changes in the price methodology arising due to the COVID-19 pandemic?;
• Should the company amend the contractual framework, applicable to intragroup transactions, so as to reflect the current conditions?

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