COVID-19 has had a significant impact on supply chains and continues to cause companies to make business decisions that they likely would not make under “normal” conditions.
Companies continue to struggle with managing suppliers and customer orders given ongoing economic uncertainty. Multinational companies should consider how the new reality of their supply chains will affect their transfer pricing results (including inadvertent changes to risk profiles) and evaluate whether modifications to transfer pricing policies can help improve cash flow and deploy cash where needed.
As companies assess the tax exposure associated with the impact of COVID-19 on intercompany transactions, they should consider whether transfer pricing can help their business uncover cash flow. We help companies address the risks and opportunities facing their intercompany supply chains as a result of COVID-19 and develop strategies for managing excess profit or losses and cash flow.
The key element of this process is for companies to understand the economics of the changing facts and circumstances within their supply chains. It is not only important to consider how these changes align with current transfer pricing policies but also whether proactive changes to intercompany pricing can achieve tax efficiencies and address cash flow needs. Operationally, this situation will require tax, accounting, and finance departments to collaborate with the company’s supply chain teams.