We are pleased to present the latest edition of Tax Street – our newsletter that covers all the key developments and updates in the realm of taxation in India and across the globe for the month of September 2020.
- The 'Focus Point' covers an overview of Transfer Pricing guidance issued by different countries to address challenges due to COVID-19 crisis.
- Under the 'From the Judiciary' section, we provide in brief, the key rulings on important cases, and our take on the same.
- Our 'Tax Talk' provides key updates on the important tax-related news from India and across the globe.
- Under 'Compliance Calendar', we list down the important due dates with regard to direct tax, transfer pricing and indirect tax in the month.
An Overview of Transfer Pricing guidance issued by different countries to address challenges due to COVID-19 crisis
The COVID-19 pandemic has resulted in a worldwide disruption of business operations leading to severe losses and gaps in the supply chain for most businesses. Tax Authorities across the world have provided certain guidelines on transfer pricing requirements to be fulfilled by the businesses to avoid litigations in the times to come. The guidelines issued by countries such as Australia, New Zealand and Singapore predominantly elaborate on the difficulties that might be faced by the businesses in preparing the relevant documentation, the need, and base for term testing, APA arrangements, etc.
Highlights of guidance issued by different Tax Authorities
i. Assess the economic impacts of COVID-19 on transfer pricing arrangements
- Functions, Assets and Risk profile (FAR): The FAR profile of the entity before and after COVID-19.
- Economic circumstances: The taxpayer will need to outline and provide evidence for the actual economic impact of COVID-19 on its business operations. Further, this impact may be supported by a broader analysis of how the relevant industry is affected in which the taxpayer operates.
- Contractual arrangements: The taxpayer will need to explain the impact on contractual arrangements between himself(taxpayer) and its related parties (including termination clauses, penalty notices, force majeure, or other clauses if applicable).
- Impact on the product and/or service offering: The taxpayer will need to demonstrate the impact of COVID-19 on the specific product and/or service offerings it is dealing with and how this has affected the financial results.
- Business strategies: The taxpayer will need to provide evidence related to the changes in its business strategies as a result of COVID-19. This may include key decisions made, expected outcomes, and actions taken to give effect to those strategies.
- Change in/ impact on business: The taxpayer will need to gather evidence to support any changes to the business or impacts on the business as a result of COVID-19.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.