In the context of the Guatemalan tax regulations, the Transfer Pricing obligation has become a crucial aspect for companies performing related party transactions abroad. Since Guatemala adhered to the Special Appraisal Rules among Related Parties in 2012, followed by the reactivation thereof in 2015, companies have faced increased scrutiny from the SAT (Superintendencia de Administración Tributaria – Superintendency of Tax Administration) regarding Transfer Pricing documentation and compliance.
Transfer Pricing Obligation
According to the current legislation, the taxpayer who has carried out related party transactions abroad in a given fiscal year must file the Annex on Related Party Transactions, along with the Income Tax Return, no later than March 31 of the year following the closing of the fiscal year. Likewise, taxpayers must keep a Transfer Pricing Study as reporting support, which requires extensive information, not only of the Company and the Transference Pricing transactions but of the economic group
Basic Transfer Pricing Study Information
The Technical Guide issued by the SAT establishes specific guidelines for the Transfer Pricing Study preparation, which includes a letter signed by the legal representative and the necessary points of the report structure. Regarding the basic required information, information related to the business group is requested (description of the organizational structure, identification of the companies comprising the group, their business activity, supply chain of the main products and/or services, and significant service agreements among related parties, among others), information on the related parties, functional and economic analysis, and detailed supporting documentation.
From the above, the requested information requires a significant effort for collecting and analyzing data, as well as a deep knowledge of the international Transfer Pricing regulations and principles.
Supporting Documentation
If there is no requested Transfer Pricing Study when filing the Annex on Related Party Transactions, the SAT can request it in writing, usually within 20 business days.
In this regard, the SAT has been aggressive in requesting and reviewing Transfer Pricing Studies, which resulted in many taxpayers facing exhaustive audits and detailed requirements for financial information.
Conclusions
Despite the challenges taxpayers may face regarding Transfer Pricing, compliance with this obligation may significantly benefit taxpayers regarding tax transparency and risk mitigation.
In addition, expert Transfer Pricing advice is recommended to ensure a proper Transfer Pricing Study preparation and declaration of the Annex on Related Party Transactions.
