The multifaceted impact of COVID-19 is far reaching to say the least. As time goes on, we will eventually look back and realize what a huge milestone this was. We cannot see these colossal changes very clearly yet as we are too engulfed in tackling the “right here, right now” issues associated with it. 

Some industries will rise, and others will fail and never recover. The way companies operate and employees go about their daily lives will change forever.  Below, I have outlined 10 points from a transfer pricing perspective that call for our attention: 

1. Zombie and viable companies are all part of your new comparable set. The current stimulus programs carried out across the globe are creating all sorts of economic distortions. Some industries are thriving during the pandemic and should not be entitled to any stimulus money or tax breaks, but inevitably they will reap stimulus-related benefits. Other industries need help to stay afloat at least for some time. In the end, financial performance could be largely driven by public interventions and not by market forces;
2. As the pandemic impacts different industries in various parts of the globe, the ripple effect could lead to material reallocations of functions, assets, and risks;
3. Internal contracts, Advance Pricing Agreements and other pre-pandemic arrangements could have been breached and need to be re-evaluated;
4. In some instances, unorthodox transfer pricing methods, such as loss splitting methods could now be appropriate;
5. Intercompany services need to be revisited as some services may just cease to exist or lack economic benefit;
6. Intellectual Property (IP) for some industries such as brick and mortar retail may just lose value; while others such as ecommerce, delivery services, and health care may shoot up. New royalty agreements need to be put in place while legacy royalty flows may need tweaking;
7. The pricing of tangible goods may need to be adjusted. Some transfer pricing models where distributors have a guaranteed profit may become unworkable;
8. Large drops in the price of goods could trigger custom audits as duty payments diminish. Russia comes to mind right away.
9. It appears that research and development (R&D) funding has declined in general during the pandemic. This will have a direct impact on existing cost sharing agreements and the future development of intangible assets across group affiliates.
10. Taxpayer losses are inevitable as some companies are rescued by these massive stimulus packages only to fail later. As we know, the simple fact of booking losses remains the number one transfer pricing audit trigger.

I hope this outline provides some insight in key transfer pricing areas that should be actively monitored and managed as the economic impact of COVID-19 keeps materializing for years to come.