COVID-19 has caused major disruptions to supply and demand behavior worldwide. Company supply chains have been severely impacted causing lost revenue, delayed production and a variety of other interruptions. The following chart presents the impact of COVID-19 to intercompany transactions and explores potential scenarios for organizations to modify transfer pricing payments in order to move cash to where it is needed most during this short-term crisis.
To accommodate the possible effects of disruption, revisions to the organization’s intercompany agreement and documentation will need to be implemented to help tax authorities comprehend the nature of changes. The table presents potential scenarios, analyses, documentation and risks that companies should thoughtfully consider upon revising any intercompany transaction based on tangible goods, intangible goods, services or financial transactions. These can be helpful as organizations consider ways to meet working capital/cash flow needs, address debt obligations and alleviate uncertainty during this current pandemic.