AMC Consulting
Recently, the Revenue and Customs Control Agency (ARCA) has intensified its supervision of international transactions concerning Transfer Pricing (TP) compliance. The Agency has been sending notifications to taxpayers, notifying them of potential international transactions that may be subject to TP regulations.
On June 18, 2021, was published in the Official Gazette the Federal Administration of Public Revenues (“AFIP“) General Resolution 5010/2021 (“RG 5010“), applicable to fiscal years ending on December 31, 2020 and thereafter, the main purpose of which is to establish the implementation of a Simplified Regime for International Transactions (“Simplified Regime”), and to extend for 3 (three) months the Transfer Pricing (“TP”) filing due dates, moving them to the end of next September.
Argentina is adapting its Transfer Pricing and related Information Regimes to international standards, mainly based on the document issued by the Organization for Economic Cooperation and Development (“OECD”) in 2015, which details an exhaustive action plan to prevent base erosion and profit shifting, known as “BEPS”.
In 2017, through Law 27.430, amendments were introduced in the Income Tax Law (ITL) (Decree 824/19). Among these amendments, article 20 was incorporated, providing the following:
“For all purposes provided for in this law, any reference to “jurisdictions with low or null taxation” shall be understood as referring to those countries, domains, jurisdictions, territories, associated states or special tax regimes that establish a maximum income tax rate of less than sixty percent (60%) of the rate referred to in article 73 (a) of this Law.”
The rate referred to in article 73 of the ITL is 25%. At the same time, Decree 862/2019, ruling the ITL, in its article 25 establishes:
“For the purpose of determining the level of taxation referred to in article 20 of the ITL, the total tax rate, in each jurisdiction, levied on business income shall be considered, regardless of the levels of government that established it.”
“Special tax regime” means any specific regulation or scheme which departs from the general income tax regime in force in that country and which results in an effective rate lower than that established in the general regime.”
In accordance with the foregoing and having established the regulatory framework on which the definition of Country or Jurisdiction of Low or Null Taxation (CJLNT) is based, it can be concluded that those taxpayers whose income tax rate is less than 15%, qualify as such (having determined said limit by application of 60% on the rate of 25%, whether it is a jurisdictional level lower than the national one, or a special taxation regime).
Consequently, it remains on the taxpayer’s side to check or inquire about the income tax rate applicable in the jurisdictions with which it operates, and therefore to determine whether Transfer Pricing (TP) obligations apply.
Determining the effective tax rate of certain countries or jurisdictions often turns out to be quite difficult since in the absence of public information, taxpayers may have to request support from independent customers or suppliers, with the bureaucratic burden that this entails, or the lack of response on many occasions. In turn, leaving this responsibility on the taxpayer’s side may lead to omitting to consider certain jurisdictions CJLNT. For example, in cases where language difficulties may arise, or where exists a diversity of rates within the same territory, among other complexities.
So far, although it has leaked out that AFIP will issue a General Instruction for internal use with the list of CJLNT, taxpayers and professionals in the field would expect the publication of an exhaustive list that extinguishes the existing uncertainty in this regard and at the same time allows to develop best practices for the fulfillment of TP obligations.
A few days ago, AFIP began an extensive campaign of requirements to taxpayers for compliance with two Information Regimes related to Groups of Multinational Entities (MNGE). It is, on the one hand, the Register of Related Parties, and on the other, the Information Regime for entities that are part of a GEMN.
As for the Register of Related Parties, it is an information regime that had been implemented by AFIP in 2013 (General Resolution “GR” AFIP 3572/2013) with two chapters. Chapter I consisted of a web service created to register all related parties (domestic or foreign) (“the Registry”); while Chapter II requested to report domestic transactions with related parties, through a monthly affidavit (F.4502).
Although this information regime was in force, many taxpayers chose not to submit it, given the excessive workload it represented, to the extent that the report of local transactions (Chapter II) was somehow deprecated, and was finally derogated by AFIP in 2019. After this modification, only the registration obligations established in Chapter I remained in force, as well as those to keep the Registry up to date. Within 10 days of the occurrence, any event that configures a change relating to the local or foreign related subjects shall be registered.
The Registry regained relevance since the new regulatory framework of the Transfer Pricing regime after the sanction of the GR AFIP 4717/2020, where the uploading of the related parties to the annual Transfer Pricing (“TP”) Return form F.2668 is automatically absorbed from the Registry, thus forcing it to be kept updated.
Regarding the Information Regime for taxpayers belonging to a MNGE, it has been in force since 2017, according to GR AFIP 4130-E/2017, and requires local taxpayers who have the status of belonging to a GEMN to report who their Ultimate Parent Entity (“UPE”) is, consolidated revenues of the MNGE and other formal data regarding said entity.
In addition, the aforementioned GR also regulates the submission of Country-by-Country Reports, aligning Argentina with the international standards arising from the OECD’s BEPS Plan.
In this sense, the gaze of the tax authorities worldwide is increasingly shifting from the individual taxpayer and focusing on the MNGE. AFIP has done the same and began requiring taxpayers to complete this information regime by filing form F.8096. This is a relatively simple form to complete, but its non-compliance can lead to significant fines.
From the above, it is important to keep both informative regimes up to date, in order to avoid fines or having to comply with AFIP requirements within very short deadlines, with the difficulties that may entail gathering information from related companies and the UEC.