By Hernán Ubertazzi, 3D Asesores, Buenos Aires
On April 30, Argentina’s tax agency announced that it will extend for a period of three months the deadlines to submit the transfer pricing documentation for fiscal years ending December 31, 2020, through December 31, 2021. So, for fiscal year ending December 31, 2020, the due date is extended from June to September 2021.
Days later, the agency made available on its webpage a series of recommendations and suggestions for documenting controlled transactions that have taken place during the pandemic. The recommendations are aligned with OECD guidance on the transfer pricing implications of the COVID-19 pandemic.
There are not yet any Argentina laws regulating either the new guidance or the three-month extension. It is expected that the tax agency will publish a general resolution on the extension and guidance in the coming weeks.
With respect to the functional analysis to include in the transfer pricing report, taxpayers should distinguish the new risks assumed by the taxpayer due to the economic effects of the pandemic from those corresponding to their usual activity.
With respect to the functional analysis to include in the transfer pricing report, taxpayers should distinguish the new risks assumed by the taxpayer due to the economic effects of the pandemic from those corresponding to their usual activity.
Taxpayers should identify and quantify all extraordinary results linked to the pandemic and use public information available regarding the effects of the COVID-19 on the business, industry, and transactions subject to analysis.
The sources of information that might be used for the analysis could include variations in sales volumes, incremental or exceptional costs borne by the parties involved in the controlled transactions, and a comparison of internal budget information with actual results.
Other relevant information could include previous recessions’ effects on profitability or on the behavior of independent third parties and any relevant macroeconomic information.
The Argentina tax authorities have remarked that the most reliable information for performing the comparability analyses is information related to transactions with independent parties during the same period. If possible, it is suggested to use local comparables, corresponding to operations that have greater conjunctural similarity.
In principle, multi-year analyses would not be acceptable, because they could lead to distortions of results from pre- and post-pandemic periods. It is recommended to use financial information from comparable companies for the same fiscal period under study. Comparable companies with recurring losses would not be considered valid.
Situations in which losses are assigned to a low-risk or limited-risk distributor because of the pandemic should be scrutinized. In this scenario, it must be considered whether the positions adopted before and after the pandemic are coherent.
Finally, the analysis should consider the terms and conditions of any pandemic assistance provided to the taxpayer by the Argentine government.
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