adjustments - Covid-19 crisis

Adjust your transfer pricing policy to reflect new market conditions

Why should I adjust my transfer pricing policy?

The economic and health crises we are currently experiencing create a radical break with previous market conditions.

Transfer pricing policies have to evolve to reflect these new market conditions, but also to follow the new operational realities of firms.

It is necessary to perform these adjustments as soon as possible to limit the impact on custom duties and to anticipate all operational transfer pricing aspects.

For more details, check our article on this issue published in MNE tax.

How can we help?

Transfer prices must reflect market conditions at the time when transactions are concluded.

To apply the transactional net margin method (TNMM, also called CPM in the US), margins applied in today’s transactions must reflect profitability levels that will be achieved by comparable companies in 2020. TP qube has developed a suite of financial and statistical tools to estimate these margin levels, and adjust your comparable company searches.

Adjusting your comparable companies’ searches is the most robust and costs-effective way to anticipate the impact of the crisis on your transfer pricing policy. 

Our approach to adjust comparable companies’ searches

1 – Data gathering

TP qube gathers basic information on the tested party financials and on the benchmark used for the previous fiscal years. In the absence of such benchmark, TP qube can also perform a new one.

Relying on an existing search of comparable companies reduces the costs, and supports the continuity of the transfer pricing system through this period.

2 – Proprietary  algorithms

The algorithms developed by TP qube provide an estimated adjustment to the arm’s length range for the fiscal year 2020, based on multiple statistical models.

3 – Documentation

Results are summarized in a comprehensive report that can be presented to tax authorities.

Get in touch to discuss how we can adjust your comparable company searches

Find more details in our brochure

Q&A

For each study, we present the outcome of multiple models. At present, TP qube relies on 3 different model families to compute adjustments.  For each model family, we have trained different algorithms per industry and per geography.

The final choice of an adjustment to the arm’s length range is based on each model accuracy but also on their likeliness to convince local tax authorities.

Yes. Our models notably take into account the evolution of the tested party turnover or costs in the last months, allowing us to capture the magnitude of the crisis for the tested party.

Results can be obtained in a few weeks.

Adjustments can be performed for all geographies.

Do not hesitate to contact us at info@tpqube.com. It will be our pleasure to help you.