Legal
Business
Employment Legal Business EmploymentWhen we refer to Transfer Pricing Studies, we are talking about the prices agreed between several related companies of a business group, generally between a parent company and a subsidiary, for operations related to the exchange of tangible and intangible goods, provision of services, transfer and use of intangibles and financial operations. But is it mandatory to submit a Transfer Pricing Study?
In some countries, the Transfer Pricing Study must be submitted if requested by the tax administration. On the other hand, in others it must be submitted on a mandatory basis prior to the possible review by the Treasury.
If you have decided to launch into the international market, your company operates in Latin American countries such as Mexico, Chile, Brazil and Colombia, and you are not yet familiar with the regulations, we confirm that the Transfer Pricing Study is mandatory to submit in the following countries:
The obligation to carry out the Transfer Pricing Study in Mexico is included in Article 76 sections XII of the Income Tax Law. Taxpayers who carry out business activities whose income in the immediately preceding fiscal year exceeds MXN 13M are required to carry out the Transfer Pricing Study in Mexico, reducing this requirement to MXN 3M for taxpayers whose income derived from the provision of professional services, who have maintained operations with a related party.
The fact of not having identified in the accounting the operations with related parties residing abroad entails penalties ranging from $1,950 MXN to $5,860 MXN for each operation not identified in the accounting. In addition, the consequences of not having a Transfer Pricing Study is the invalidation of the authorized deductions since the transfer pricing methodology is not complied with and there is also no supporting documentation required for their deduction (Article 76, section IX of the LISR, Article 28 and Article 84 Section XIII of the CFF and Article 33 of the RCFF).
In the case of intercompany loans, there is a risk that the deductibility of interest is not accredited or that even the deposits recorded as a loan are considered as unjustified income.
In Colombia, those companies that as of December 31 of the immediately preceding year that their annual turnover is greater than 515,000 euros or 2,172,027,000 Colombian pesos for the 2020 fiscal year and/or that the gross assets are greater than 845,000 euros or 3,560,700,000 Colombian pesos, approximately, for the 2020 fiscal year and that have maintained operations with a related party must file the informative return.
In addition, taxpayers who, in addition to meeting the above requirements, meet the cumulative amount per individual linked transaction exceeds 380,000 euros or 1,602,315,000 Colombian pesos for the 2020 fiscal year or who have operations with tax havens worth more than 356,070,000 COPs or 85,000 euros for the 2020 fiscal year, will be required to file the supporting return.
Finally, taxpayers who are part of a Multinational Group are also required to submit a Master Report.
For Transfer Pricing Studies (TPS) in Colombia, there may be an obligation to file an Informative Statement and also an obligation to submit Supporting Documentation.
In both cases there are sanctions for different reasons.
The penalties, for omission of information or for non-presentation related to operations with entities domiciled in tax havens, can reach up to 30,000 UVTs, that is, 1,068,210,000 Colombian pesos (about 240,000 euros) for the taxable year 2020.
Peruvian taxpayers will be required to file different types of returns according to the characteristics of each company: the Local Report Informative Affidavit, the Master Report Informative Affidavit and the Country by Country Informative Affidavit.
In the event that there is no Transfer Pricing Study in Peru and that the prices agreed by the taxpayer are not valued in accordance with the Arm’s Length Principle, the Tax Authority will have the power to adjust the value agreed upon by the parties when it determines in the country a lower tax than the one that corresponds to the application of transfer pricing rules.
If there is no Transfer Pricing Study in Peru, in the event that the prices agreed by the taxpayer are not valued in accordance with the Arm’s Length Principle, the Tax Authority has the power to adjust the value agreed upon by the parties when it determines in the country a lower tax than would correspond by application of transfer pricing rules.
Companies must conduct a Transfer Pricing Study in Brazil when transacting with economic partners that are domiciled in a country other than Brazil and with which they have a corporate relationship and/or economic dependence.
In Chile there are two different obligations: the annual Transfer Pricing Affidavit must be submitted until June 30 on an annual basis, if necessary an extension of up to 3 months can be requested from the Chilean Internal Revenue Service (SII), and the obligation to carry out the local Transfer Pricing Study to support these obligations.
This declaration/study is mandatory for those medium and large companies that have maintained transactions with a related party and for small companies that have had transactions with a related party for an amount greater than 700,000 EUE approx.
At UR Global we reflect the knowledge acquired with the management of more than 400 subsidiaries of small and medium-sized companies in Spain, Portugal and Latin American countries and the performance of nearly 200 Transfer Pricing Studies per year.
In addition, we recommend that in a situation where local and international tax authorities review these transactions in detail, it is important to have a firm like UR Global, which is responsible for carrying out the Master File in Spain and other Latin American countries.
If you want us to clarify your doubts and you need to carry out a Master File in Spain or a Transfer Pricing Study in Latin American countries, contact us.
Trend
