Transfer Pricing in Argentina

Concept and Regulation in Argentina

Transfer Pricing in Argentina has as a normative antecedent the tax reform introduced by Law No. 25,063 on December 30, 1998, which contains some provisions related to this matter.

Nevertheless, it is only with the enactment of Law No. 27430 in 2017, which amends the Income Tax Law, which covers this regime and deepened and aligned with the new provisions established by the Organization for Economic Cooperation and Development (OECD) on the matter, by the Action 13 of the BEPS (Base and Erosion and Profit Shifting) Plan. 

Subsequently, Decree 1170/2018 was enacted in 2018, which amends the Income Tax Law Regulations due to the reforms introduced by the aforementioned law. 

Additionally, the AFIP (Administración Federal de Ingresos Públicos – Federal Administration of Public Revenues) published the General Resolution 4717/2020, which establishes, among others, provisions related to the Informative Affidavits, Local Report, Master File, and Country-by-Country Report. 

Application Scope of Transfer Pricing

According to Article 15 of the Income Tax Law, as amended by Law No. 27430, and Article 2 of General Resolution 47147/2020AFIP, transactions carried out with related parties and/or with parties domiciled or located in non-cooperative jurisdictions for tax transparency purposes, or low or no taxation jurisdictions, will be under the Transfer Pricing scope. 

Regarding related party transactions, the aforementioned resolution specifies as follows: 

1. Transactions with individuals, legal entities, establishments, and trusts domiciled or located abroad. 
2. Transactions performed by the taxpayers resident in Argentina with the permanent establishment abroad or those performed by such establishments with others of the same owner or with persons or entities in the country or abroad if related to the resident of the country.
3. Other related parties or entities resident abroad. 

Definition of Related Parties in Argentina

The unnumbered article following legal Article 15 indicates when to configure the relationship. 

According to this article, it will be established when a given subject and another person or entity with which transactions are performed are directly or indirectly subject to the management or control of the same persons, whether natural or legal. 

Another possibility occurs when the latter, due to participation in the capital, level of accretion, functional influences, or others, can influence the decisions of these subjects. 

Likewise, Article 11 of the Regulations states that relationships occur when:

• All or a majority part of the capital of another is owned. 
• Two or more subjects have another one in common, which totally or mostly owns the capital of both or the participation in the capital of one or more subjects and significantly influences one or more subjects or can influence both. 
• A subject has the necessary votes to make decisions. 
• When directors, officers, or managers are owned in common in two or more subjects. 
• You have an exclusive agent, distributor, or dealer. 
• One subject is the provider of a technological property or technical knowledge, which is essential to the activity of the other.
• The subject participates with another in an association, transitory union, condominium, or others without legal personality and influences the price significantly. 
• A subject agrees with other preferential clauses differing from those stipulated with third parties in similar circumstances. 
• A subject significantly participates in the setting of business policies. 
• A subject performs a relevant activity only with another, or its existence only regards another. 
• A subject provides substantial funds to perform other subject’s activities through mutual loans or guarantees. 
• A subject is responsible for the losses of the other. 
• The management of a subject is vested in someone with a minority equity stake. 

Transfer Pricing Methods

According to the third paragraph of Article 17 of the Law, the most appropriate methods for the nature of the transaction will be used to determine whether the agreed prices comply with the market value. 

In turn, Article 21.4, paragraph 21 of the Regulations states the methods to be employed as follows: 

• Comparable Uncontrolled Price Method 
• Resale Price Method. 
• Cost Plus Method. 
• Profit Shifting Method. 
• Transactional Net Margin Method. 
• Other methods. 

In the case of other methods, the standard states they will be employed for intangible assets or investments in assets without comparable transactions as long as the other chosen method is better than any of the listed above. 

Transfer Pricing Affidavit in Argentina

Article 21.30 of the Regulation states that taxpayers subject to Transfer Pricing rules must file certain information statements, such as Local Report (Transfer Pricing Study), Master File, and Country-by-Country Report (CbC Report). 

Local Report

It describes the structure of the taxpayer, its activities, strategies, clients, related parties, or residents in non-cooperative jurisdictions and their transactions, as well as the analysis. 

According to Article 44 of Resolution 4717/2020, taxpayers residing in Argentina must file as long as: 

• The total amount of its related party transactions in a fiscal year exceeds 30,000,000 pesos or 
• The members of a Multinational Group must file the Country-by-Country Report or Master File when their related party transactions exceed 3,000,000 pesos or 300,000 pesos individually. 
• Taxpayers performing transactions with subjects residing in tax havens when the total amount of such transactions exceeds 3,000,000 or 300,000 pesos individually. 

This Study or Local Report will be filed in the F-4501 Affidavit form through the mechanisms established by FAPR. 

Master File

It will provide an overview of the business, multinational group structure, group activities, assumed risks, used assets, and others. 

According to Article 45 of the aforementioned resolution, Multinational Group members, understood as such, according to Annex I of General Resolution 4.130, a group of two or more entities from different jurisdictions shall be required to file it. 

Filing the aforementioned report will not be a requirement when: 

• The total consolidated revenue of the group does not exceed two billion pesos ($2,000,000,000) in the fiscal year before the year of its filing.  
• Related party transactions do not jointly exceed, in the tax period, three million pesos ($3,000,000) or 300,000 pesos individually. 

Country by Country Report

It contains information on the Multinational Group, such as the jurisdictions in which each entity operates, financial and tax information, and taxes paid, among others. 

According to Article 2 of General Resolution No. 4,130/17, only the following parties must file this: 

• The last controlling entity of the group residing in Argentina. 
• A so-called substitute entity resident in Argentina designated by the controlling entity for these purposes. 
• The group member entity resident. When the controlling entity is not required in its jurisdiction by this report, there is a Country-by-Country Report agreement within the jurisdiction of the controlling entity but without the agreement of competent authorities, or there is a systematic non-compliance with the reporting exchange agreement. 

Reporting entities are exempt when the consolidated revenues of the multinational group in the fiscal year before the reporting year is less than € 750,000,000. 

Such reporting shall be filed via Form 8097 through the AFIP website. 

Form 2668

According to Article 47 of Resolution 4717/2020, entities performing transactions with related parties or parties located in tax havens, which in the last two fiscal periods before the one reported, had been required to file the Informative Transfer Pricing established by General Resolution 1,122, shall be required to file Form 2668. 

In this form, the data of the international transactions in the Transfer Pricing scope within the period shall be reported. 

Due Date of Affidavits

The Transfer Pricing Study and Form 2668 must be filed by the sixth month after the closing date, according to the TIN (Taxpayer Identification Number) last digit. 

The Master File and Country-by-Country Report must be filed up to the twelfth month after the closing date, according to the TIN last digit. 

It should be noted that the Transitory Provision of General Resolution 4717/2020 indicated a special deadline for tax periods established between December 31, 2018, and April 30, 2020, whereby these should be filed in June, August, and October 2020, depending on the period closing date. 

Transfer Pricing Documentation in Argentina

The taxpayer must keep the documentation on the transactions covered by this regime, even if not required to file any affidavit. 

Transfer Pricing Non-Compliance

The sanction for not filing any of the aforementioned informative affidavits will be, according to Article 38 of the Argentine Tax Code, between 10,000 and 20,000 pesos. 

Likewise, according to Article 39 of Law 25.795, individuals or legal entities will be fined from 150.00 to 2,500.00 pesos. 

On the other hand, Article 18 establishes the power of the AFIP to determine the tax obligations when not filing the respective informative affidavits or the transfer pricing report. If the authority disagrees with the prices or considerations agreed upon by the taxpayer with its related parties, there should be no difference to the taxable income with updates, interests, and a fine ranging from 1 to 4 times the omitted tax. 

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