Introduction to Transfer Pricing Audits in Chile
The tax environment in Chile has experienced an increase in the surveillance and control of intercompany transactions by the tax authority. In this context, Transfer Pricing audits have become a key mechanism to ensure that companies comply with the Arm’s Length Principle, guaranteeing that related party transactions are at Arm’s Length prices.
The SII (Servicio de Impuestos Internos – Internal Revenue Service) has intensified its efforts to detect and correct practices that may erode the tax base, which places companies under closer scrutiny.
Main Trends in Audits
In recent years, the selection of specific sectors for Transfer Pricing audits has been increasing in Chile, focusing on industries with a high volume of intercompany transactions, such as the financial, pharmaceutical, and technology sectors. The SII has been especially interested in analyzing complex Transfer Pricing structures, such as intangible services and intra-group financing arrangements. In addition, the authority has been using advanced technological tools increasingly to detect inconsistencies in Transfer Pricing statements.
Recommendations for an Audit Preparation
Preparation is key to successfully facing a Transfer Pricing audit. Companies should ensure solid intercompany transaction documentation, including a detailed comparative analysis under market practices. This documentation must follow local and international regulations, such as OECD guidelines. In addition, performing internal audit simulations can identify and correct potential risk areas before an inspection. Cooperation and transparency with the authorities during the audit process are also essential to achieving a favorable outcome.
International Legislation Effects on Chilean Audits
The international legislative framework, particularly the actions of the OECD’s BEPS (Base Erosion and Profit Shifting) project, has significantly affected the processes of Transfer Pricing audits in Chile. The SII has adopted many of the OECD recommendations, which has led to a closer alignment of Chilean practices with international standards. This alignment implies that multinational companies must be more concerned with compliance, as the standards for documentation and support of Transfer Pricing are becoming more demanding.
Conclusions and Next Procedures
In the face of the increasingly stringent tax environment, companies must prioritize their correct Transfer Pricing management to avoid penalties seriously affecting their transactions. Transfer Pricing policies should be periodically reviewed, update supporting documentation, and keep abreast of the latest legislative amendments locally and internationally.
For optimal compliance, companies should have expertized support available to comply with all tax obligations related to Transfer Pricing.
