Taxing authority and tax law
Tax authority: Internal Revenue Service (Administración Federal de Ingresos Públicos, or AFIP))
Tax law: Income Tax Law (ITL) and Regulations
Relevant regulations and rulings
Regulations currently in effect:
- AFIP-DGI (AFIP-Dirección General Impositiva) Regulation No. 1,122 (Published 31 October 2001, but applicable for fiscal years beginning on 31 December 1999) as amended by several regulations (No. 1,227/02; No. 1,296/02; No. 1,339/02; No. 1,590/03; No. 1,663/04; No. 1,670/04; No. 1,918/05; No. 1,958/05, No. 1,987/05 and External Note No. 1/08)
- Binding tax rulings for general application are not provided
- Opinions from the tax authority are scarce and non-binding
OECD guidelines treatment
Argentina is not an OECD member, and the OECD Transfer Pricing guidelines are not referenced in Argentina’s Tax Law and Regulations. However, the tax authority usually recognizes the OECD Transfer Pricing guidelines in practice as long as they do not contradict the ITL and Regulations.
A first-level court case dated 15 August 2007 was based on the provisions of the OECD Transfer Pricing guidelines. Other more recent first-level court cases also recognized the use of the OECD Transfer Pricing guidelines as long as they do not contradict the ITL and Regulations.
Priorities/pricing methods
The tested party must be the local entity (i.e., the entity based in Argentina). The taxpayer selects the most appropriate method, but the AFIP may oppose the selection. The accepted methods for transactions with related parties and tax havens pursuant to the ITL are the comparable uncontrolled price (CUP), resale price, cost plus, profit split and transactional net margin methods. The ITL does not prioritize methods. Regulation 1,122/01 states the best method rule.
The use of an interquartile range is mandatory. Unless there is evidence to the contrary, the market price must be used for tangible goods transactions with both related and independent parties where there is an international price in a transparent market.
For transactions involving grains, oleaginous products, other soil products, oil and gas and in general all goods with well-known prices in transparent markets and where the local company operates through international intermediaries that are not the final consignees of the goods, the applicable price is the prevailing price in the respective market on the day loading for shipment is finished, or the agreed-upon price if higher. This method may not apply, however, if the local exporter is able to prove the substance of the operations of the consignee abroad. The AFIP has the power to limit the application of this method or extend it to other transactions under certain circumstances.
Export and import transactions with independent parties not located in tax havens are subject to information requirements if the annual amount of the transaction exceeds ARS1m or the transactions are exports and imports of commodities. The requirements depend on different annual transaction amounts and, in some cases, may include calculations of profit margins.
Transfer pricing penalties
For unpaid taxes related to international transactions, the taxpayer is fined 100% to 400% of the unpaid tax. This fine is graduated depending upon the level of compliance with the formal duties related to the control of the taxes derived from international transactions established by the AFIP. Penalties for fraud are 2 to 10 times the unpaid taxes.
Criminal tax law stipulates imprisonment for two to six years if the unpaid tax exceeds ARS100,000 for each tax and fiscal year. If the unpaid tax exceeds ARS1m, the prison term will increase, ranging from three-and-a-half to nine years. For the late filing of tax returns containing international transactions involving the export/import of goods with independent parties, the taxpayer will be fined ARS9,000.
For the late filing of tax returns concerning other international transactions, the taxpayer will be fined ARS20,000. For the application of penalties related to late filing or lack of filing, it is irrelevant whether the transactions were at arm’s length. For non-compliance with the formal duties of furnishing information requested by the AFIP, the taxpayer faces fines up to ARS45,000. The same applies to a failure to keep vouchers and evidence of prices on available files and failure to file tax returns upon request. If tax returns are not filed after the third request, and the taxpayer has income amounting to more than ARS10m, the fine is increased from ARS90,000 to ARS450,000. Interest is applicable on unpaid tax balances (from 1 July 2006, the rate is 2% on a monthly basis and 3% upon filing of a lawsuit).
Penalty relief
Concerning underpayment and fraud, if the non-recidivist taxpayer voluntarily amends the tax returns before receiving a special notice (or vista) from the AFIP, the penalty is reduced to one-third of the minimum fine. If the tax returns are amended within 15 days of receipt of the notice, the penalty is reduced to two-thirds of the minimum fine. If the non-recidivist taxpayer accepts the adjustments assessed by AFIP and pays the amounts due, the penalties are set at the minimum amount. If the taxes due do not exceed ARS1,000 and are paid voluntarily, or within 15 days of the special notice, then no penalty shall be applied.
Documentation requirements
Transfer pricing regulations require extensive contemporaneous documentation. Taxpayers are required to keep and eventually submit all the documents evidencing that prices, amounts received and profit margins have been established on an arm’s-length basis. Furthermore, taxpayers are required to file an annual transfer pricing study for transactions, subject to transfer pricing methods, with related parties, deemed related parties and independent parties located in tax havens.
Documentation deadlines
The transfer pricing documentation must be ready for filing with the AFIP by the date the corresponding transfer pricing return filings are due. An annual transfer pricing study, financial statements and certification must be filed with the tax authority by the end of the eighth month after the end of the fiscal year.
The annual transfer pricing return must also be filed by the end of the eighth month after the end of the fiscal year. However, the transfer pricing adjustments must be recognized when the income tax return is due (i.e., fifth month after the fiscal year-end). The semiannual returns must be filed by the end of the fifth month after the end of the relevant six-month period. The annual return for export and import transactions with independent parties not located in tax havens must be filed by the end of the seventh month after the end of the fiscal year.
Statute of limitations on transfer pricing assessments
The general statute of limitations for federal tax matters is 5 years for registered taxpayers or those exempt from registration and 10 years for unregistered taxpayers. These periods begin on 1 January of the year following the year in which the tax return is due. The moratorium regime in place during calendar year 2009 added one year to the statute of limitations period for certain fiscal years. The transfer pricing documentation must be kept by the taxpayer and provided upon AFIP´s request for up to five years after the period established by the statute of limitations.
Return disclosures/related-party disclosures
Taxpayers are required to file the following documentation with the AFIP:
- An annual transfer pricing study
- Audited financial statements for the fiscal year
- An independent Certified Public Accountant’s certification of certain contents of the transfer pricing study
- Annual Form 743 return
- Form 742 return (for the first six-month period of each fiscal year)
- Semi-Annual Form 741 return for commodities exports and imports with independent parties not located in tax havens
- Annual Form 867 return for other exports and imports with independent parties not located in tax havens
Audit risk/transfer pricing scrutiny
Transfer pricing audits are becoming more frequent and intensive, so that a high risk may be assumed. In addition, the first-level court cases are being published. Although the taxpayer position prevailed in most of these cases, the most recent decision was in favor of the tax authority. It is likely that the tax authority will try to increase revenue and strictly enforce penalties with companies that are not complying with transfer pricing requirements.
APA opportunity
APAs are not specifically addressed.
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