Transfer Pricing Regulations in Paraguay

The Transfer Pricing regulations aim to ensure that the transactions recorded among related companies have been made at prices similar to those among independent companies under market conditions, complying with the Arm’s Length Principle, to avoid the artificial profit shifting among tax jurisdictions to reduce the tax burden.

The Transfer Pricing regulations started on January 1, 2021, as established by the SET (Subsecretaría de Estado de Tributación – Undersecretary of State for Taxation).

Entities Involved in the Scope

According to the SET, the corporate income taxpayers subject to file the Technical Transfer Pricing Study (TTPS) are those who:

1. Enter into transactions with related parties resident abroad or locally, with which one thereof is exempted or not subject to the corporate income tax and has a gross income above ₲ 10,000,000,000 in the immediately preceding fiscal year.
2. Perform transactions with residents in tax havens, users of free trade zones, or maquiladora companies as long as the relationship presumption has not been rebutted under Article 4 of General Resolution No. 96/2021.

Entities Exempted from the Scope

Those taxpayers that liquidate the corporate income tax under the SIMPLE or RESIMPLE regime.

Documentation to Be Filed

According to the OECD, the types of documentation to be filed related to Transfer Pricing are 3:

1. Local Report
2. Master File
3. Country-by-Country Report

According to this classification and the profile corresponding to Paraguay published in the OECD, the TTPS is considered a Local Report. This report must contain a functional and economic analysis of the transactions subject to this regime registered by the local entity, as well as a description of the organizational and operational structure of the taxpayer.

It should be noted that although Paraguayan regulations do not require the Master File and the Country-by-Country Report to be separately filed, the information related to the Business Group is contained in the TTPS filed to the SET.

Technical Transfer Pricing Study Significance

The significance of a TTPS prepared by expert advisors is supported by Article 17 of Decree No. 4644-2020. According to this article, intra-group services will be under the Arm’s Length Principle to the extent the effective rendering can be documented, the recipient of the service is benefited, and the price paid for such service under market values in comparable circumstances.

Formal Obligations Non-Compliance

Penalties related to non-compliance with formal obligations are detailed in Art. 17 of General Resolution 115/2022.

TTPS Filing Dates

Art. 9 of General Resolution 115/2022 details:

Late filing is subject to penalties according to Article 17 of the aforementioned Resolution.

Timely filing reduces the risk of possible tax adjustments or controversies related to Transfer Pricing, which can improve the corporate image before clients, investors, and authorities.