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- Transfer pricing legislation is based on the Income Tax Law (ITL) and ITL Regulations. The Arm’s Length Principle is referenced in Articles 9, 16 to 20, 126 and 127 of the ITL.1 Additionally, transfer pricing legislation is supplemented by the Argentine Internal Revenue Service (Administración Federal de Ingresos Públicos, AFIP) Regulatory Decree N°862/2019 and General Regulation N° 4717/2020 (as amended by several regulations) (documentation requirements).
- Under the law of Argentina, the OECD rules are taken as recommendations and used for interpretation of the local rules.
- Taxpayers must first apply the Comparable Uncontrolled Price Method (CUPM), and may only use the Resale Price Method (RPM), Cost Plus Method (CPM), Profit Split Method (PSM), Residual Profit Split Method (RPSM) and the Transactional Operating Profit Margin Method (TOPMM), when the CUPM is not the appropriate one to determine the arm’s length principle of the transactions performed.
- According to Article 17, fifth paragraph, ITL, Article 29 of Decree. No. 862/2019 and Articles 34 and 35 of GR No. 4,717/2020 and its amendments. Other methods may apply to specific transactions (when the special circumstances of the transaction prevent the valuation of its assets, risks or functions). e.g. in the case of the transfer of valuable and unique intangible assets, specific assets or rights difficult to assimilate to other assets on the market, in the transfer of share or participation in the capital of companies that are not listed on the stock market or financial assets that do not have comparable contributions or transactions with or between independent parties, or in the case of the investment in unique assets that don’t have comparable and whose activation only produces average results through the amortization of such assets. It should be justified, from a technical and economic perspective, the need to use any of other methods and, if the application of any of the above methods is not appropriate due to the nature and characteristics of the activities, to the extent that the other method applied represents a better option and adequate documentation should be provided.
In Argentina there are four types of TP documentation: (i) transfer pricing report, (ii) local file, (iii) master file and (iv) CbCR.
In addition, the new rules modify the minimum requirements for the submission of the transfer pricing study and master file as follows:
Taxpayers with transactions with foreign related parties or third parties domiciled in non-cooperating jurisdictions or low-tax or no-tax jurisdictions for over ARS3,000,000 (approx. US $30,000) in total or ARS300,000 (approx. US $3,000) per transaction must submit the transfer pricing study (Form 4501).
Taxpayers that are part of a group of multinational entities (according to Argentine country-by-country report definitions) and comply with the following requirements must submit the master file:
Taxpayers that exceed in the prior tax year ARS4 billion (approx. US $40 million) of consolidated annual income at the multinational group level
Taxpayers with transactions with foreign related parties for amounts over ARS3 million (approx. US $30,000) in total or ARS300,000 (approx. US $3,000) per transactionAs far as the CbCR is concerned, Mexico is attached to what is expressed by the OECD, so the content that this report should include is the same as what the OECD indicates it should contain.The threshold for the CbCR is $12,000,000,000 pesos of consolidated income in the immediately preceding fiscal year.
There is a notification requirement for CBC reporting in Argentina. This requirement consists of two stages. The first notification requirement explains in which country and which entity will carry out the reporting requirement. The deadline is the last business day of the third month at the end of the FY. The second notification must be submitted at the end of the two months at the latest after the CbCR deadline. For FY 2021, the first notification must be submitted on 31 March 2022, and the second notification must be submitted on 28 February 2023 at the latest.
- Persistent losses in any entity.
- Transactions with low tax jurisdictions resident related parties.
- Business restructurings, or changes in TP model, can also trigger a challenge but needless to say, businesses can evolve, and if the previous TP method no longer appears the most appropriate, it should always be reviewed, rather than being ignored for the sake of maintaining consistency.
- Global marketing expenses payments if locally this type of expense are also incurred.
- Pursuant to Article 57 GR 4717/2020, Article 15 GR 4130-E, Article 38 of the Argentinian Tax Code, and the legislation N° 25.795 of 2003, the applicable penalties in relation to international transactions are:
- The taxpayer may be fined between amounts of ARS 10.000 and ARS 20.000 for non-filing or delayed filing of transfer pricing return,
- A penalty of ARS 45.000 is imposed if the tax authorities have served a request to file the transfer pricing return for each failure to comply with a request. Up to ARS 450.000 additional
- Penalty may be imposed for the taxpayers with more gross revenue than ARS 10.000.000 after the third filing request.
- A penalty from ARS 80.000 to ARS 200.000 will be applied for the non-filing or delayed or inaccurate filing of the information related to the membership of a local taxpayer to a multinational group;
- A penalty from ARS 600.000 to ARS 900.000 will be applied for the non-filing or delayed filing or inaccurate filing of the F.8097 form regarding CBCR;
- A penalty from ARS 180.000 to ARS 300.000 will be applied for non-compliance with a requirement made by the tax authorities.
- If an omission is detected in the abovementioned circumstances, the taxpayer is considered to be monitored in the increased risk category
- In addition, the following penalties will be applied in the case of an adjustment of the transfer prices settled with foreign parties:
- A fine on tax omission between 1 and 4 times the tax not paid or withheld;
- Interests on the additional tax due.
- Usually the use worldwide comparable companies search is employed.
- The use of interquartile range is required and there is a methodology in ITL to perform this calculation.
- In terms of TP and considering the effect of COVID-19, it is expected to postpone the filing date of the TP returns in order to be able to make 2020 comparisons and compare the 2020 financial information of the tested party against the 2020 financial information of comparable companies.