9th annual dla piper latin america tax update webinar/media/files/insights/events/2016/09/... ·...

9TH

ANNUAL DLA PIPER

LATIN AMERICA TAX UPDATE

WEBINAR

LATAM TAX POLICY:

ATTRACTING OR DISCOURAGING INVESTORS?

Tuesday, September 20, 2016

US Dial-in: 1 .800. 920 .5541

Outside the US: 1 .212 .231 .2915

*This webinar is offered for informational purposes only, and the content should not be construed as

legal advice on any matter.

Business in Latin America: Agenda

1. Welcome remarks

2. Latin America overview

- Definition and stats

- Typical HoldCo structure discussion and recommendations

3. Panel discussion

- Comparative tax operating costs

- LRD and S&M operations as an option (trends, challenges, cases, etc.)

- TP: APAs environment in LATAM

- E-commerce update

- Tax amnesties (rational, opportunities / consequences)

- BEPS in 2016 and what 2017 may bring

4. Per – country update

5. Transfer pricing update

- Regional reporting characteristics

- Per country technical status

- Best practices / recommendations

- Regional BEPS Action 13 / CBC status

Presenters

June, 2014 2

Abelardo Acosta Mexican Tax Desk

DLA Piper, San Diego

[email protected]

+1 858 677 1440

John Guarin Latin American Tax Desk

DLA Piper, New York

[email protected]

+1(212)776.3877

**Campos Mello Advogados is an independent Brazilian law firm.

Felipe Ospina Partner

DLA Piper Martinez Neira, Colombia

[email protected]

(571) 317.4720

Alison Maxwell Tax Partner

DLA Piper, Seattle

[email protected]

+1 (206) 839-4878

Antonio Macias Principal Economist, LatAm Transfer

Pricing

DLA Piper, Miami

[email protected]

+1 305.423.8526

Alex Jorge Partner, Co-Head of Tax*

Campos Mello Advogados, São Paulo, Brazil

[email protected]

+1 (212) 335-4541

+55 (11) 3077-3500

mailto:[email protected]







Latin America overview

John Guarin

Project Manager, Latin American Tax Desk

DLA Piper, New York



Business in Latin America: region’s definition and stats (2015)*

Alphabetical Listing

21+13 Caricom

jurisdictions

Population

7/21= 81% of Regional Population

GDP (US$)

7/21= 86% Regional GDP

GNI per capita, Atlas Method

(current US$)

Argentina Brazil: 208 million Brazil: $1.775 trillion Puerto Rico: $19,300

Bolivia Mexico: 127 million Mexico: $1.144 trillion Uruguay: $15,700

Brazil Colombia: 48 million Argentina : $548 billion (2014) Chile: $14,000

Chile Argentina: 43 million Venezuela: $371 billion (2013) Argentina: $13,600 (2014)

Colombia Peru: 31 million Colombia: $292 billion Panama: $12,000

Costa Rica Venezuela: 31 million Chile: $240 billion Venezuela: $11,800 (2013)

Cuba Chile: 18 million Peru: $192 billion Costa Rica: $10,200

Dominican Republic Guatemala: 16 million Puerto Rico: $101 billion (2013) Brazil: $9,900

Ecuador Ecuador: 16 million Ecuador: $101 billion Mexico: $9,700

El Salvador Cuba: 11 million Cuba $77 billion (2013) Colombia: $7,100

Guatemala Bolivia: 11 million Dominican Republic: $67 billion Peru: $6,200

Haiti Haiti: 11 million Guatemala: $64 billion Dominican Republic: $6,100

Honduras Dominican Republic: 11 million Uruguay: $53 billion Ecuador: $6,000

Mexico Honduras: 8 million Panama: $52 billion Cuba: $5,900 (2011)

Nicaragua Paraguay: 7 million Costa Rica: $51 billion Paraguay: $4,200

Panama El Salvador: 6 million Bolivia: $33 billion El Salvador: $3,900

Paraguay Nicaragua: 6 million Paraguay: $28 billion Guatemala: $3,600

Peru Costa Rica: 5 million El Salvador: $26 billion Bolivia: $3,100

Puerto Rico Panama: 4 million Honduras: $20 billion Honduras: $2,300

Uruguay Puerto Rico: 3 million Nicaragua: $13 billion Nicaragua: $1,900

Venezuela Uruguay: 3 million Haiti: $9 billion Haiti: $800

Source: http://data.worldbank.org/country

http://data.worldbank.org/country

Spain (15)

6/7

Netherlands (6)

4/7

Switzerland (7)

6/7

Luxembourg (3)

2/7

US (3)

2/7

Barbados (4)

2/7

Argentina

Barbados

Bolivia

Brazil

Chile

Colombia

Costa Rica

Cuba

Dominican Rep.

Ecuador

El Salvador

Mexico

Panama

Uruguay

Venezuela

Argentina

Barbados

Brazil

Mexico

Panama

Venezuela

Argentina

Barbados

Chile

Colombia

Ecuador

Mexico

Peru

Uruguay

Venezuela

Barbados

Brazil

Mexico

Panama

Mexico

Barbados

Venezuela

Cuba

Mexico

Panama

Venezuela

Signed, not yet in

force: Peru

Chile, Colombia,

Costa Rica

and

Uruguay in

the agenda

Signed, not yet in

force:

Argentina

(1981)

Chile

(2010)

Argentina, Brazil

and

Colombia,

in the

agenda

Business in Latin America: tax treaty network and HoldCo regimes

Signed, not yet in

force:

Uruguay

Spain (17)

6/7

Netherlands (15)

3/7

Switzerland (18)

6/7

Luxembourg (9)

5/7

US(5)

1/7

Argentina

Chile

Costa Rica

Colombia

Cuba

Dominican Rep

El Salvador

Ecuador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Paraguay

Peru

Uruguay

Venezuela

Argentina

Costa Rica

Cuba

Dominican Rep

Ecuador

El Salvador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Paraguay

Peru

Uruguay

*Bolivia’s BIT was

terminated

Argentina

Bolivia

Chile

Colombia

Costa Rica

Cuba

Dominican Rep

Ecuador

El Salvador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Paraguay

Peru

Uruguay

Venezuela

Argentina

Chile

El Salvador

Mexico

Paraguay

Peru

Uruguay

Venezuela


terminated

Argentina

Ecuador

Honduras

Panama

Uruguay


terminated

Protection may be

sought through

FTAs with:

- Chile

- Colombia

- Peru

- Mexico

Business in Latin America: BITs network + HoldCo regime

Business in Latin America: Legal and tax considerations of doing business

• Legal

- Foreign exchange control: Central Bank / other regulatory authority (influx / outflow)

- Formal requirements for capital contribution / reduction, change of ownership (notary public, mercantile registrations, central bank registrations)

- Expanded liability to parent (tax / labor) or foreign service provider (WHT FIN48)

- Expropriation / nationalization risk

- Employment / immigration / government procurement / contractual restrictions

• Tax

- Frequency of tax reforms

- Income tax payable: NOT only on net income (COL and CE.AM: minimum presumptive income)

- Indirect taxation beyond VAT (e.g., tax on financial transactions; turnover tax; other)

- Several levels of taxation (national / provincial / municipal)

- Tax – free reorganization provisions subject to detailed requirements

- TP local customized methods (ARG and ECU: commodities / 6th method; BRZ: predefined margins)

- High WHT rates and relatively limited access to lower treaty rates

• Stand – alone SPV

• To shield rest of the group of local liability (tax, labor, exchange control, other)

- Tax haven HoldCo

- Negative perception but negative effects have lessen due to signing of tax / tax information

exchange agreements

- Tax treaty HoldCo

• Regional OECD model network expanding (only CHL and MEX are members)

• PE definition / exemption on capital gains and / or lower WHT

• Tax controversies forum

• Some provide non-obvious advantages (Argentinean net asset tax; Colombian wealth tax

or dividend equalization tax)

- Bilateral investment treaty HoldCo

• Compensation if expropriated

• Independent / neutral judicial remedy via arbitration (vs. local court procedures)

• Deters unjust unilateral actions by states

Business in Latin America: Typical HoldCo discussion / characteristics

Requires efficient HoldCo

participation exemption regime

Business in Latin American: Typical HoldCo structure

US

Holding SPV

Tax Treaty

Holding SPV

Tax Haven

Other region OpCos

Latin America

Other jurisdictions

Principal / IP

SPV

Services SPV

LATAM OpCos

Maquila / LRD /

S&M

LATAM OpCos

Maquila / LRD /

S&M

Regional tax update: Trends – cont’d.

Tax regional trends

Hefty audits on cross – border transactions

Expense relationship with generation of taxable income

Proper documentation

Proper WHT application

Tax treaty benefit claims

Tax residency certificate + (BEPs) Operating substance of payment recipient

Triangular transactions

LRD consistency (vis-à-vis FOREX volatility local currencies v. US$)

Tax amnesties

Electronic tax audit surveillance

10

Panel Discussion

REGIONAL TAX TRENDS

MODERATOR

• John Guarín

PANELISTS

• Alex Jorge

• Felipe Ospina

• Abelardo Acosta

• Antonio Macias Valdes



Discussion

Comparative tax operating costs

2011 / 2016 / 2017 and beyond

LRD and S&M subsidiaries

Operating

Challenged

Regulations# / draft legislation# / court decisions

TP: Current APAs environment in LATAM

E-commerce provisions

Tax amnesties

Motivation

Opportunities for compliant taxpayers

Timing

TP: Expected / already required BEPs documentation / compliance effects

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Brazil Update

Post-presidential impeachment: what tax changes to expect



Alex Jorge Partner, Co-Head of Tax*

Campos Mello Advogados, São Paulo, Brazil

[email protected]

+1 (212) 335-4541

+55 (11) 3077-3500


Regional tax update: Brazil

Political and Economic Highlights

President Dilma was impeached on August 31 by the Brazilian Senate

New President, Michel Temer, perceived to be more centered and pro-business

which should

New government will focus on reducing budgetary expenses

Labor and Social Security reforms

Adjustments to “social programs”

Infrastructure projects and privatization

No word on tax reform or tax increases until October, due to municipal

elections (bank tax comeback rumors)

Consensus: in 2017, the economy is expected to show positive GDP growth

and reduction in inflation rates, which could lead to cuts in the interest rates


Recent relevant tax changes: federal

In 2015 companies had a significant increase in taxes by cutting incentives and

increasing rates

No changes to interest on net equity rules, since Congress did not convert

Provisional Measure 694/2015 into Law

Provisional Measure 685/2015 introducing mandatory disclosure of aggressive

tax planning arrangements in answer to BEPS was rejected by Congress

In 2016-2017 no significant tax changes so far but

Increase in Capital Gains Tax to individuals and foreign investors holding

assets in Brazil (i.e., shares) as of Jan 1 2017

15

% Threshold (in BRL)

15.0 5 million

17.5 5 to 10 million

20.0 10 to 30 million

22.5 30 million and over


Recent relevant tax changes: State and Local

The Council of State Tax Treasuries has passed legislation (Convenio ICMS

nº 42/2016) authorizing states to either:

Charge an amount of, at least, 10% of the benefit to restore State budget

or

Reduce the tax incentive or grant given to, at least, 10%

Some states i.e., Rio de Janeiro and Pernambuco, have introduced such

Convenio into local state laws

Quite controversial since most tax incentives and grants given are subject to

counterparts or conditions (i.e., jobs creation, ICMS minimum collections,

etc.)

Possibility to file a judicial claim to enjoin or make escrow deposit payments

16


17

Areas of opportunities - benchmark

Tax litigation activity has significantly increased

Exclusion of 20% payroll tax on certain non-compensation items (i.e.,

additional paid vacation, certain severance payouts, etc.)

Challenging PIS / COFINS on financial revenues at 4.65% (i.e., interest

income)

Exclusion of sales taxes from the tax calculation basis of gross revenues taxes

(PIS / COFINS)

Payments on international cost sharing arrangements without withholding

taxes

Application of Article 7 (business profits) to avoid withholding tax on payments

for importation of certain types of services from double tax treaty jurisdictions

Review of tax positions, particularly on PIS / COFINS credits

Expenses related to the production, distribution or services activities

Leases and rentals


FY2016 tax closing tips and checklist for 2017

Prospects of more foreign investment and more pro-business government

Tax increases from 2015 continue to hurt businesses

Possibly no additional tax rate increases or new taxes (except for the bank tax

which may resume discussions after local elections in October)

Tax litigation opportunities

10% surcharge by states (Convenio ICMS 42)

Payroll tax on non-compensation items

Exclusion of sales taxes from PIS / COFINS basis

International cost sharing

Article 7 of DTT on importation of services

Review PIS / COFINS positions

Review transactions which may result in capital gains tax

FY2016 closing tips

Colombia

what to expect, how “structural” is it

really going to be?

Felipe Ospina Partner

DLA Piper Martinez Neira, Colombia

[email protected]

(571) 317.4720


Relevant tax changes (expected)

FY 2016 tax reform announced and expected:

– “Structural tax reform” has been a topic form the early 1990. 2016:

– Affirmative actions

– OECD technical assistance

– Tax experts commission report.

– Divisions at government on timing of implementation

Income tax

– Tightening rules on non – for – profit organizations

– Tightening of enforcement and anti-avoidance provisions (e-invoicing, restrictions on

deductibility of cash payments; BEPS provisions)

– Potential increase on capital gains rate (currently 10%)

– Limiting exempt income

– IFRS tax accounting being considered

– WHT on dividends (to increase tax revenue / facilitate public support)

– Reduction of CIT? Abolishment of surtaxes CREE & SCREE?

VAT

– General rate increase from 16% to 18% or 19%

– Reduction of list of exempt goods and services

What is being audited?

Payments to foreign parties: There is an increased audit on the deduction of

cross-border payments, particularly on the need of evidencing whether foreign or

local related party charges or any nature are real, duly supported and necessary

to generate taxable income

Transfer pricing: While still incipient, there is increased administrative action in

regard to substantive aspects of the transfer pricing regime (since 2003, when it

was enacted, most disputes have revolved around formal issues, such as non-

filing of returns and supporting documentation).

Payments to individuals: Payments made to individuals (both employees and

independent service providers) are only deductible for income tax purposes if

social security contributions are timely made. With the creation of an agency

which controls these contributions, there has also been increased activity from

the Tax Administration.

FY2016 closing tips

As the CIT rate is expected to go down on the medium term, 2016-2017 are

good years to consider accelerated amortizations or depreciations

Given that the current capital gains rate (10%) would likely be increased

substantially (up to 15%-20%). Indirect transfer of Colombian assets may also be

included in the reform, consider:

– opportunities of step up in basis

– triggering restructuring before tax reform is approved

Consider triggering corporate distributions (dividend payment) before tax reforms

is approved

VAT is likely to increase from 16% to 18%-19%. As VAT on the import or

purchase of fixed assets is not creditable against output VAT, but part of the

amortization / depreciation basis, consider accelerating major investments or

imports

Mexico

Practical hurdles resulting from the 2014 tax reform:

what to expect for the remainder of the presidential

term

Abelardo Acosta Mexican Tax Desk

DLA Piper, San Diego

[email protected]

+1 858 677 1440


Relevant tax changes (recent / expected)

FY2014 tax reform provided for certain tax features that are still creating tension

related to their implementation. Some examples:

Electronic accounting records, as well as electronic audits and assessments

10% withholding tax imposed on individuals and nonresidents on earnings

generated since 2014:

There may be income tax treaties available that could reduce or eliminate this tax

Capital gains tax on indirect transfer of shares

Disclosure of relevant transactions – Form 76

Among them: certain financial transactions (derivatives), TP adjustments, changes in

ownership (direct and indirect), transfer of shares, tax residency migrations, corporate

reorganizations, changes in functions (maquilas included), transfer of intangibles, mergers

and spin offs, financing structures where interest is accrued but not paid, transfers of NOLs

Informative transfer pricing (TP) returns, and country-by-country reporting (CbC),

local and master file, driven by Action 13 of the BEPS report.

No significant tax changes or increases expected for remainder of FY 2016 or 2017

25

Hacienda has increased significantly tax audit activities on cross-border payments

Interest on financing structures (thin-capitalization rules, back to back considerations,

documentation, disclosure requirements)

Services (whether they were actually provided, benefit that was obtained through the service

that was received, technical knowledge of service provider)

Dividend distributions, capital gains taxes, royalties, services, and technical assistance to

foreign related parties

Hacienda has challenged the deductibility of these payments by taking into account

the following considerations:

Whether the recipient of those payments is disregarded for tax purposes

The payment is deemed not to exist

And / or whether those payments are not subject to tax at the hands of the recipients

Some of the reduced rates under income tax treaties have also been challenged on

the grounds of the ability to claim treaty benefits (i.e., LOB provisions), or whether they

met TP provisions. This has generated a substantial increase in tax revenue from

large taxpayers.

26

What is being audited?

Dividend distributions?

Is there sufficient CUFIN? What years are the profits coming from?

Check if treaty benefits are available to mitigate potential 10% WHT

Intra-group charges?

Meet deductibility requirements?

Review existing payments for royalties, interest and technical assistance

Evaluate alternatives for restructuring cross-border payments

Changes in ownership? Changes to activities / risks / functions?

Revisit type of activities and thresholds to confirm if Form 76 should be filed

27

FY2016 closing tips

Argentina, Chile & Peru

update notes

2016 tax reform and Law 27,260

An invitation for foreign investors



Update Notes : Argentina

2013 tax reform

Capital gains tax at 15% on net gain or 90% of gross; dividend WHT tax at 10%

(+35% equalization); and extended application of 0.6% bank credit / debit tax through

end of 2015

2014 audit / regulations

Foreign exchange reserves at critical levels

Triangular transaction audit

Unit for monitoring and tracing foreign trade transactions

2015 Presidential election year

Whitewash bill / tax amnesty 5th extension to 06/30/2015 (federal tax only)

10 – year payment facility regulation (not a moratorium) so penalty and interest are

payable

2016 Omnibus Law 27,260

FOREX controls relief

Tax reform and Amnesty

29

Update Notes : Argentina

2016 tax reform – How friendly to foreign investment is it?

WHT on dividends at 10% (repealed)

Rate reduction on personal assets tax (1.25%)

0.75% (FY2016) ; 0.5% (FY2017) 0.25% (FY2018 onwards)

Elimination of minimum presumptive CIT calculation basis of 1% of assets (FY2019)

Tax amnesty

Limited benefits compared to 2014 whitewash amnesty

True up on assets with payment of an special tax @15%

Deductible? Creditable? None of the above TBD

Bicameral commission of analysis of a future “structural tax reform” FY2017

1 year to present a report

Support from other government institutions

2016 additional tax adjustment under analysis

Adjustment to individual tax trenches and rates potentially:

From 9 to 35% to 6 to 40%

Lowering of scale trench values for individuals

30

Update Notes : Argentina – Provincial Level

Turnover tax historically

Tax on gross income charged at provincial level (23 Provinces + BBAA City)

Not applicable to NR without PE in the province

Turnover Tax Withholding (TOW) / Res. 594 issued in BBAA City

Date: August 27, 2014

Initially expected entry into force: January 11,2014

Postponed indefinitely as of January 26, 2015 … change in political environment

Rate & Basis: 3% on gross payment to:

593 foreign entertainers

594 online subscription to [tv/movie/games/music/other] content

WHT agent: credit card/debit card issuer

Copied by the province of BBAA

RELEVANCE

LATAM copy / paste legislators (e.g., bank debit; equity tax; 6th TP method, other)

E-commerce taxa to date still on principles (e.g., PE; VAT; service / royalty)

31

Chile

Dividend distribution option scenarios from FY 2017



Update Notes : Chile

Chilean CIT

Historically, Chile has applied a low CIT rates of 17 to 25% and a

dividend WHT of 35% only payable upon distributions abroad,

against which a CIT tax credit can be claimed

2014 tax reform affected the above in phases and with options

Temporary regime phase: FY2014 to FY2016

Same Chilean deferral system with yearly increase of CIT rate

Permanent regime phase: as of FY2017 and thereafter

CIT rate at 27%

Breaks CIT regime into separate options at taxpayers’ choice:

Attributable regime (total burden of 35%)

Semi-integrated regime (total burden of 35 or 44.45%)

33

Semi-integrated

CIT: 27%

WHT: 35% with 27% credit

Additional debit tax: 9.45%*

Total non tax-treaty shareholders: 44.45%

Total to tax treaty Shareholders: 35%

34

Attributed

CIT: 25%

WHT*: 35% with 25% credit

Total to US Shareholders: 35%

*No deferral allowed

Permanent regime 2017 forward

2014

CIT: 21%

WHT:35% with 21% credit

Total to US S/holders: 35%

Temporary

2015

CIT: 22.5%

WHT: 35% with 22.5% credit


2016

CIT: 24%

WHT: 35% with 24% credit


Where do U.S. shareholders fall?


Other income tax changes becoming effective in FY2017

- End of tax NOL carry-back regime

- End of profit-reinvestment mechanism

- Changes to the capital gain tax regime

35


Attributed or semi-integrated- Time to make your mind-up

Consider:

- How regularly are dividends paid?

- Forecast capital needs: Not paying dividends in the next few years?

- Cost/benefit analysis

Peru

A Pedro Pablo Kuczynski (PPK) tax regime What to expect over the next five years



Law 30,296 / 2014 tax reform:

Electronic tax audits

Increase expense question powers

Nominal reduction of Peruvian CIT effect:

Aimed at inviting reinvestment of profits but a distribution in a later year

Stability tax agreement beneficiaries are excluded

FY CIT % DIV WHT % ETR (same year distribution)

2014 30 4.1 32.87

2015 and 2016 28 6.8 32.90

2017 and 2018 27 8 32.84

2019 and

thereafter

26 9.3 32.80

Update Notes : Peru

Potential PPK tax reform

Stop progressive CIT reduction and increase of dividend WHT – go back to

FY2014 rates

VAT rate reduction?

FY CIT % DIV WHT % ETR (same year distribution)

2014 30 4.1 32.87

2015 and 2016 28 6.8 32.90

2017 and 2018 27 8 32.84

2019 and

thereafter

26 9.3 32.80

Update Notes : Peru

Consider:

- Paying the dividend in 2017?

- Closing on that sale in 2016?

Peru

Private letter ruling provisions:

Before tax event

Only binding for applicant (does not constitute precedent)

2012 GAAR / Anti-abuse provisions / SUNAT

Re-characterization authority if no real business purpose

Electronic remote partial tax audit procedure

Transfer pricing audit team (former Deloitte and other ex-Big 4 team)

Treaties that came into force: Mexico, Korea, Portugal and Switzerland

Update Notes : Peru

Regional Transfer Pricing

Compliance Considerations

Antonio Macias Principal Economist, LATAM TP

DLA Piper, Miami

[email protected]

+1 305.423.8526


Navegating TP in LATAM

High – level overview

Intensive documentation

requirements

Certain deviation from

arm’s length principle

Different knowledge curve

– tax authorities

Out of the blue audits

Country

Annual TP

Documentation

Annual TP

Informative Return TP Audits

Argentina Yes Yes High

Bolivia Yes Yes Low

Brasil Yes Yes High

Chile Yes Yes High

Colombia Yes Yes High

Costa Rica Yes Yes Medium

Cuba N/A N/A N/A

Dominican Republic Yes Yes Medium

Ecuador Yes Yes Medium

El Salvador Yes Yes Medium

Guatemala Yes Yes High

Honduras Yes Yes Medium

Jamaica No Yes (Optional) Low

México Yes Yes High

Nicaragua Yes (2016) Yes (2016) NA

Panamá Yes Yes Medium

Paraguay No No NA

Puerto Rico Yes No Low

Uruguay Yes Yes High

Venezuela Yes Yes High

Latin America TP Colors

Transfer pricing in a nutshell

Mexico – leading country / tax authority sophisticated and aggressive

Brazil – outlier in TP world – double taxation

Argentina – transfer pricing from customs perspective

Colombia – increasing number of tax audits- formalistic

Peru – extremely focus in transfer pricing audits

Chile – high expectation of tax collection through TP adjustments

Ecuador – limitation related to management / royalty

Venezuela – consider other factors

Panama – out of the blue audits – pick and choose method by tax authority

Uruguay – audit focus in selection of comparable companies

Guatemala – massive requirements of TP studies

Costa Rica – new transfer pricing requirements

Best practices in the region

Best practices in latam

Regional approach for documentation

Similar fact pattern / consistency - language

Time sensitive – start early (February)

Gathering of financial information – segmentation / Local statuary

Highlight TP policy – agreement – result

Review results from both side of equation

Manage proactively expectations of external auditors

APAs – divided into countries with realistic and unrealistic possibilities

for a successful agreement

Solution to Brazil – proactive approach

BEPS transfer pricing (Action 13)

The transfer pricing documentation / information requirements are based on

a three layer structure

Country – by – Country Report

One informative return that will provide key financial information of the

companies of the group and a classification of the activities performed

Master file

One report that will provide the overall description of the MNE group, its

business model, supply chain and the transfer pricing policy

Local file

A report for each of the local entity that will provide local information and the

compliance of the arm’s length principle through the selection and application of

a method (usually this is consistent to the actual transfer pricing documentation)

Latam OECD / BEPS clasification

Latam BEPs classification

Degree of involvement in BEPS Initiatives

OECD Members /

Applicant

CbC Exchange of

Information

OECD Convention

Mutual Tax Assistance No Participation

Chile Chile Chile Ecuador

Mexico Mexico Mexico Peru

Costa Rica* Costa Rica Colombia Venezuela

Colombia* Brazil Costa Rica

Uruguay Brazil

Uruguay

Argentina

Dominican Republic

Guatemala

El Salvador

Panama

* Sill in the application process

BEPS TP Implications in LatAm

Local taxpayer

No significant increase in the production of additional local transfer pricing

documentations

CbC will be share to local tax authority through automatic exchange of information

Opportunity for taxpayer for supporting the transfer pricing results with their

Business model and global transfer pricing policies through the Master File report

Tax authority

Access to global information through automatic exchange of information related to

the CbC

Tax authority will have access to the group’s transfer pricing model

More efficient transfer pricing audit

Identify taxpayers that are not aligned to their global transfer pricing model

Inconsistency in their local results

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9th annual dla piper latin america tax update webinar/media/files/insights/events/2016/09/... ·...

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