France : Transfer Pricing and Covid-19

While these are often clearly identifiable and of immediate impact, others are more subtle and therefore more difficult to identify and anticipate.

This is the case for transfer pricing issues generated by the crisis.


Whether it is a distribution entity or a service provider, companies must justify the prices charged in their intragroup transactions.

To do so, they identify independent comparable companies on specialised databases; on the basis of the available data, they establish a benchmark of market prices and deduce an arm’s length range within which their prices must be set.

However, the available data is always at least one year behind schedule. In a “classic” economic context, from one year to the next, the prices in years N-2 and N-1 are more or less the same as those in year N. But how can a relevant benchmark be established for the year 2020 – taking into account the economic impact of the global health crisis of the Covid19 – on the basis of the financial elements of the years 2018 and 2019?

In the absence of comments from the OECD or the French tax authorities, practitioners have wondered about concrete solutions to this unprecedented situation.

A comparability adjustment (a practice accepted both in the OECD principles and by administrative doctrine) must be made, so that the comparables and 2019 financial data used in the comparables study are effectively relevant in establishing an arm’s length margin for 2020.

A number of options have been considered :

  • Include in the benchmark comparables that are normally excluded due to recurring losses over several years, thereby lowering the arm’s length range for the year 2020
  • Exceptionally position the company’s margin in the 1st quartile for fiscal year 2020
  • Simulate the economic impact of the company on the available comparables and their financial data to deduce a relevant arm’s length interval for the year 2020.

These options should be analysed taking into account the company’s economic background and the chosen option should be documented.

The comparability adjustment strategy will have to be adapted to the specific situation of each company, taking into account the economic impact of the health crisis on the results of the financial year 2020, last year’s results and the pre-Covid forecast balance sheets for 2020.

Whatever strategy is adopted will then have to be validated by a corroborative analysis to be carried out during 2021, once 2020 financial data is available.
In this respect, it should also be noted that in the event of a significant market recovery in 2021, an adjustment and a corroborative analysis will have to be carried out in the other direction, in order to ensure that the 2020 results do not show an abnormally low arm’s length range for 2021.

Comparability adjustments and corroborative analysis will have to be extensively documented in transfer pricing documentation.


To exceptional economic circumstances and adapted transfer prices, enhanced transfer pricing documentation.

Prior to any comparability adjustment, it will be necessary to review the transfer pricing documentation and intra-group contracts of the different entities and to re-examine the functional analysis, in order to determine the effective economic impact to be borne by each of the group entities.

Indeed, the French tax authorities may be more reluctant to accept a significant economic impact of the health crisis on routine entities, which usually bear a low risk.
However, such an impact could be accepted if it is well documented.

In all cases, it will be necessary to gather evidence that the situation of the company, in light of the unfavourable economic context of 2020, remains one of full arm’s length, and that the risks to be borne by the entity have de facto materialised.


The Covid health crisis19 may have the derivative consequence of motivating companies to review in depth not only their transfer pricing documentation but also their intragroup contracts.

It has become clear in recent months that it is crucial to incorporate into these documents clear procedures that will make it possible to manage a radical and ad hoc change in the applicable arm’s length range and associated parameters, be they generated by exceptional circumstances of all kinds.



Altexis remains at your side and assists you in the management of the consequences of the post-quarantine period and its economic and fiscal repercussions on your business.

Our services include :

  • A roadmap of actions to be taken to ensure the compliance of your transfer pricing policy for the financial year 2020, in the light of the economic impact of the health crisis.
  • Reviewing your transfer pricing documentation
  • The review of your intra-group contracts
  • Analysis and preparation of a comparability adjustment adapted to your company’s situation for the financial year 2020
Your contact for transfer pricing matters : Me Marine PERROT
Article dated July 8th, 2020 – Written by Me Marine Perrot, Lawyer at the Paris Bar 
By | 2020-08-07T15:02:38+02:00 July 21st, 2020|Covid-19, France, publication|

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