Abstract
This document provides a review of the Argentine tax authority’s structure for dealing with transfer pricing in Argentina; a chronological review of the legislative transfer pricing framework; and a very extensive listing of the transfer pricing cases that have reached different court levels. The document also summarises some of the difficulties encountered in relation to the application of the arm’s length principle in Argentina; coordination with foreign tax authorities; and the regulatory changes expected following the reports resulting from the G20/OECD BEPS Action Plan. Argentine transfer pricing legislation has taken several turns over time, moving from a more restrictive pricing of exports and imports for income tax purposes to what is today internationally known as the Sixth Method for commodity valuation; and from an application of what is locally known as the ‘economic reality’ principle, a principle attempting to consider the economic substance over the contractual forms, to a transplantation into local legislation of the Organisation for Economic Co-operation and Development’s Transfer Pricing Guidelines based on the arm’s length principle. The consequences of these regulatory changes have been that lately more and more cases are being disputed at different court levels, and tax authorities seem to find it increasingly difficult to challenge multinational entities’ transfer pricing manipulation schemes and support their arguments in courts of law.
Highlights
This paper aims to provide an overview of the legal, institutional and administrative arrangements for dealing with transfer pricing in Argentina.Argentine transfer pricing legislation has taken several turns over time, moving from a more restrictive pricing of exports and imports for income tax purposes to what is today internationally known as the Sixth Method for commodity valuation; and from an application of what is locally known as the ‘economic reality’ principle, a principle attempting to consider the reality of the activities over the contractual forms, to a transplantation into local legislation of the Organisation for Economic Co-operation and Development (OECD)’s Transfer Pricing Guidelines based on the arm’s length principle.Some of the legislative changes for some time were based on court interpretations of the complexities of valuing intragroup transactions
Decree 14.338/1946 amending the last paragraph of Article 9 of Law 11.682 (Income Tax Law) reads: ‘In cases where, in accordance with the preceding provisions, the wholesale price at the place of origin must be applied but it is not publicly and commonly known, or where there are doubts about whether it refers to the same goods as imported or to similar ones, or where comparison is difficult due to other reasons, the calculation of income sourced in Argentina shall be made on the basis of the percentage of profit obtained by independent enterprises engaged in identical or similar activities
The analysis of regulatory changes in relation to transfer pricing in Argentina shows that since 1976, the arm's length principle of transfer pricing has been explicitly adopted in the country
Summary
This paper aims to provide an overview of the legal, institutional and administrative arrangements for dealing with transfer pricing in Argentina. In 2004, the Internal Revenue Secretariat of the Ministry of Economy (a secretariat which is organically different from the AFIP) incorporated among its objectives the supervision of the negotiation of international agreements relating to tax and customs Following this resolution, Argentina cancelled its treaties with Spain, Chile and Switzerland, and negotiated new treaties with these jurisdictions, as well as with others such as Germany. The Large Taxpayers unit, which is considered to be the most relevant one for transfer pricing purposes, has 25 people, including inspectors and supervisors, exclusively dedicated to transfer pricing These 25 people are dedicated to auditing functions, while the 35 people working in the central Sub General Directorate of Tax Auditing design the auditing strategies. AFIP did not provide any information on the evolution of such transfer pricing audits
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