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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
abelardo.acosta@dlapiper.com
+1 858 677 1440
John Guarin Latin American Tax Desk
DLA Piper, New York
john.guarin@dlapiper.com
+1(212)776.3877
**Campos Mello Advogados is an independent Brazilian law firm.
Felipe Ospina Partner
DLA Piper Martinez Neira, Colombia
fospina@dlapipermb.com
(571) 317.4720
Alison Maxwell Tax Partner
DLA Piper, Seattle
Alison.Maxwell@dlapiper.com
+1 (206) 839-4878
Antonio Macias Principal Economist, LatAm Transfer
Pricing
DLA Piper, Miami
antonio.maciasvaldes@dlapiper.com
+1 305.423.8526
Alex Jorge Partner, Co-Head of Tax*
Campos Mello Advogados, São Paulo, Brazil
alex.jorge@cmalaw.com
+1 (212) 335-4541
+55 (11) 3077-3500
Latin America overview
John Guarin
Project Manager, Latin American Tax Desk
DLA Piper, New York
*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: 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
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
*Bolivia’s BIT was
terminated
Argentina
Ecuador
Honduras
Panama
Uruguay
*Bolivia’s BIT was
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
*This webinar is offered for informational purposes only, and the content should not be construed as
legal advice on any matter.
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
MMM dd, yyyy This is a sample presentation title in footer 12
Brazil Update
Post-presidential impeachment: what tax changes to expect
*This webinar is offered for informational purposes only, and the content should not be construed as
legal advice on any matter.
Alex Jorge Partner, Co-Head of Tax*
Campos Mello Advogados, São Paulo, Brazil
alex.jorge@cmalaw.com
+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
Regional tax update: Brazil
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
Regional tax update: Brazil
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
Regional tax update: Brazil
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
Regional tax update: Brazil
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
Colombia
what to expect, how “structural” is it
really going to be?
Felipe Ospina Partner
DLA Piper Martinez Neira, Colombia
fospina@dlapipermb.com
(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
Abelardo.acosta@dlapiper.com
+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
*This webinar is offered for informational purposes only, and the content should not be construed as
legal advice on any matter.
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
*This webinar is offered for informational purposes only, and the content should not be construed as
legal advice on any matter.
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
Total to US S/holders: 35%
2016
CIT: 24%
WHT: 35% with 24% credit
Total to US S/holders: 35%
Where do U.S. shareholders fall?
Update Notes : Chile
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
Update Notes : Chile
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
*This webinar is offered for informational purposes only, and the content should not be construed as
legal advice on any matter.
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
antonio.maciasvaldes@dlapiper.com
+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
top related