Thursday, December 9

Transfer Pricing: Controversies, criteria and sanctions

$ 1 million fine for failure to filel Transfer Pricing Report it was news in days gone by. This is the maximum allowed by the rule, in the event that a taxpayer does not submit Form 930 that deals with the matter. The case reached the Supreme Court of Justice (CSJ), where it was confirmed.

The ruling, however, has left some connoisseurs of the matter, some disagreements in relation to the criterion followed by the authorities in the solution of the tax legal conflict.

In short, the litigation is about a taxpayer who alleges that he was not obliged to present the Report of the conflict, because the norm in force at the time of the sanction required to present the report whenever there were transactions with related parties that have effects on the determination of the tax base for calculating income tax.

The taxpayer, being in a free zone, would not comply with this requirement. Hence, he was not obliged to submit the report. This position was not shared by the CSJ.

Before continuing, we must mention that the situation of the rule alleged by the fined taxpayer was modified after the case and currently, andl article 762-L It expressly obliges any natural or legal person established in any free zone to present this report 930.

Continuing the ruling and according to it, the point of view of the General Directorate of Income (DGI), confirmed by the Administrative Tax Court (TAT), endorsed by the Attorney General’s Office and finally by the CSJ, is that this exoneration of the Income Tax (ISR) that he was a taxpayer, and that would exonerate him from filing the Transfer Pricing Report, “It is not extensive for the profits or profits available for distribution to its shareholders, to which Supplementary Tax or Dividend Tax is applied.”

Then it is basically indicated that the complementary tax and the dividend tax are a kind of special income tax regimes.

This is stated in the ruling, on the basis that these taxes are regulated within the fourth book of the Tax Code, Income Tax, coupled with the fact that these taxes are not included in the list of national taxes enshrined in article 683 of the same Code, thus being understood that they are not constituted in taxes as such, but in variations or versions of the income tax. So far, the common thread is attached to the literal text of the Tax law.

How all of the above applies is what is a bit controversial. In the ruling, it is reasoned that the birth of the obligation to present the Transfer Pricing Report It was born, among other things, not from the existence of an income tax of the taxpayer directly, as it is read verbatim in the rule, because it was exempt from this tax, but it arises from the fact that its profits are taxed with a ISR for its shareholders (complementary and dividend tax), which must be withheld by the taxpayer.

And it is that, from the norm, this interpretation is not easily deduced when indicating the Article 762-D of the Tax Code plainly: “provided that such operations have effects such as income, costs or deductions in determining the tax base for ISR purposes.”

The legal personality of a company should not be confused with that of its shareholders, unless the Law so says.

Citing the Administrative Tax Court in a resolution unrelated to the case, but which perfectly illustrates the discomfort of the case in question, “the Principle of Legal Security, supposes clarity in the regulations that must be applied to the taxpayer in this case, or certainty in the standard that should be applied to him, because this leads him to know what to expect in his relationship with the State and other individuals ”.

Technical Summary of the Transfer Pricing Report

Regulation: Article 762-A and subsequent ones of the Fiscal Code

OFormal bigation: Filing Form 930. Article 765-I of the Tax Code

Where to submit the form: through the Etax2 computer system, that is, over the internet. Resolution 201-3338 of June 17, 2020.

Generator fact: carrying out operations with related parties that are tax residents of other jurisdictions, that is, in other countries. Article 762-C of the Tax Code defines a related party.

Date of presentation: Within the six months following the closing date of the corresponding fiscal period. No extensions are granted.

Penalty for non-compliance: Fine equivalent to 1% of the total amount of operations with related parties, not to exceed $ 1 million.

Tax computer control: The use of the boxes on transactions with Related Parts-Exterior of the Tax Return of Income, It is the event at the computer level that indicates to the tax authority that form 930 must be submitted, and whose non-compliance it sanctions. Currently they are boxes 5 (income), 27 (cost) and 43 (expense).

It is also important to point out that the Transfer Pricing Study, which is the document that supports the information in this Report 930, must be provided at the request of the DGI within 45 days, according to article 762-J of the Tax Code .

Failure to comply with this obligation does not have a specific sanction, so the generic sanctions established by the Law must be applied, ranging from $ 1,000 to $ 5,000 the first time and from $ 5,000 to $ 10,000 in case of repeat offenses, in addition to the closure of the establishment for two days the first time and up to ten in case of recidivism.

Mario A. Beccabunco
Public Accountant