Transfer Pricing considerations in light of COVID-19

An interview with Christian Runge, Global Head of Transfer Pricing & Tax Technology for Royal Dutch Shell plc

Over the course of May & June, Sal Partners is sharing the views of several influential figures from across the Dutch market. In our latest “Insights” publication, Christian Runge, Global Head of Transfer Pricing & Tax Technology for Royal Dutch Shell plc has shared his thoughts on the impact of the current pandemic on the Transfer Pricing market, including areas for consideration to ensure the function is best prepared for what lies ahead.

Q. What is your view on the related COVID-19 measures announced by the Dutch government?

I think the Dutch Government reacted swiftly and adequately. The measures introduced will especially help small and medium sized companies to survive this crisis, whilst also ensure people retain their jobs and get paid. For MNC’s the rules are less applicable as most MNC’s have a strong balance sheet to at least “survive” the first part of the crisis. For MNC’s the period after the crisis is more important especially in terms of what will happen to the possibilities to offset losses with pre-crisis profits. Also, a reference to the April 3rd OECD “Dealing with COVID paper,” it will be helpful to ensure the Dutch Tax Authorities follow the principals detailed within.

Q. What impact will the current climate have on the implications on APA’s and rulings?

It’s important that we consider the potential effects of the current situation on APA negotiations. Given levels of uncertainty we could find ourselves in loss making positions over the coming years. Moving forward, our focus will shift to prioritising tax certainty via APA’s and rulings.

Q. How has the current pandemic impacted existing transfer pricing policies?

We are identifying the impact and are considering, based on the “new normal”, whether we need to lower the benchmarks and share the losses more equally. It will be important for us to clearly explain our position and demonstrate the rationale for any changes made to our policies, ultimately confirming that such positions were not the result of non-arm’s length transfer pricing policies.

Q. How will your approach to documentation alter?

Documentation is critical to demonstrate why it is appropriate to maintain the same policies, or to deviate away from them. We will be focusing on more/improved documentation to get ready for an expected rise in audits and a greater focus on operational transfer pricing around impacted supply chains and how they align with the current marking which is in place.

Q. How has the restriction on movement of employees altered the functional and risk profile of the business?

The OECD guidelines from April 3, have overcome that issue, however, we must ensure we have the appropriate framework in place to limit our PE risk. Because of this guideline not having employees in their normal working country does not give rise to residency, substance or DEMPE issues.

Q. How will COVID-19 affect the current business model in place and what impacts will such changes have for transfer pricing?

Supply chains might be re-modelled by the business and as such we as Tax will follow with bench-marking adjustments of applicable margins and new cost-plus percentages. Models will need to reflect any re-allocation of functions, assets and risks across the group.

Q. Given the impact of COVID-19 on an organisations access to funding and financing, what are the consequences for inter-company financial transactions?

Chapter 10 of the OECD’s paper on financial transactions has given guidance on how to deal with inter-company financial transactions which we will analyse in the coming months to help us determine the impact on our current policies.

Q. What is the key driver for function as we look towards H2 and 2021?

Our focus has shifted to cash delivery and preservation opportunities. We will also ensure we have updated our business models, whilst making sure we are best prepared for the inevitable increase in audits we will face.


Our primary focus is to save cash, whilst also consider the impact of the current environment on our supply chains. The integrity of our frameworks will be tested, we must therefore consider how our policies will be affected and take appropriate action to prepare for the future. We will ensure our “house is in order” with respect to documentation, we will implement the effect of the OECD papers and prepare accordingly for the TP audits which will follow from this crisis. Considering these implications, whilst collecting evidence now to prepare simultaneous documentation to support the impending economic changes, will be critical.

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