Paraguay publishes rules for preparing local transfer pricing technical study report, sets deadline

By Francisco Arballo, Partner, Grupo Consultor EFE, Tijuana, Mexico

On April 7, Paraguay’s deputy minister of taxation, through the Subsecretaria de Estado de Tributación (SET), published General Resolution No. 115 regulating the technical study of transfer pricing and additional reports established in Article 39 of Law No. 6380/2019 on modernizing and simplifying the national tax system, and establishing other regulations for the application of Chapter III, Title I, Book I of the tax law.

The guidelines outline the minimum information that will be required as part of a taxpayer’s technical transfer pricing study, as well as the data related to related-party transactions that a taxpayer must provide as part of the transfer pricing information return. Additionally, the resolution gives the deadlines for filing transfer pricing forms and the transfer pricing study. It also sets an extension for the filing of documents detailing transactions with related parties that taxpayers carried out during the 2021 tax year, in addition to establishing the ways and means for the filing of such documents.

Technical content of the study

Article three of General Resolution No. 115 lists the minimum information that must be provided in the technical transfer pricing study. It is comprised of five principal sections: general Information about the taxpayer and its related parties; information on the MNE to which the taxpayer belongs; specific information about the taxpayer; relevant information for the analysis of the functions, assets and risks of the transactions as well as the parties involved; and finally, the economic analysis of intercompany transactions. A full comprehensive checklist of the information requirements for each section is detailed in the general resolution that the tax authority published.

Operations excluded from the transfer pricing regime

Article six of the resolution establishes which transactions between related parties will not be subject to the transfer pricing valuation rules. The transactions excluded from transfer pricing rules are those regarding the activities of forestation and alienation of urban and rural real estate that are part of the fixed assets of the income taxpayer, when the net income from the Paraguayan source was determined by applying the presumptive taxable base, as provided by Article 19 of the law. International operations are excluded, as well that have a net income from a Paraguayan source that is determined by applying the presumptive taxable base, in accordance with the provisions of Article 20 of the law. Equity contributions in cash are also excluded (as long as they are in the legal currency of the country); reclassifications or offsets of accounting accounts related to assets, liabilities or equity (as long as they do not affect, or may affect, the statement of income or the determination of the profitability of the entity analyzed) are excluded, too. Payment in cash of equity yields dividends or liabilities, are excluded, as well, as long as they were made in the legal currency of the country. The operations that were carried out with companies or government agencies and entities also make the exclusion list. The final exclusion is for operations of the taxpayer with related parties resident in the country—when, for both parties, such operations are not exempt or are not reached by the income tax, as indicated in the first paragraph of Article 35 of the law.

Filing of technical transfer pricing report and informative return

According to resolution No. 115, the technical study must be submitted in PDF format along with the working papers used for the development of the transfer pricing analysis. The latter must be submitted in .xls, .xlsx or .ods format with the formulas applied that allow for the verification of the calculations or related parties used.

Taxpayers must report in the Marangatu system the qualitative and quantitative summary of the operations with related parties carried out by the affected parties in the fiscal year under analysis, contemplated in the transfer pricing study.

It is important to point out that the presentation of the technical transfer pricing study, as well as the working papers, along with the qualitative and quantitative summary of the operations with related parties, will be considered as a sworn statement. The information requested in this quantitative and qualitative summary includes general information about the taxpayer, such as tax ID , legal address, identification of the related parties with which the obligated entity entered into transactions, as well as detailed information about the transactions entered into with each related party and the transfer pricing methodology applied to analyze such transactions.

Registration and deregistration of the transfer pricing compliance regime

In accordance with Article 8 of General Resolution No. 115, taxpayers will have 30 days after the end of the fiscal year to request the inclusion of obligation 957-ETPT, with a starting date of January 1 of the fiscal year to be reported.

For those taxpayers that have registered obligation 957-ETPT and have not carried out transactions with controlled companies subject to transfer pricing rules during two consecutive fiscal years, they will be able to cancel such obligations within 30 business days following the closing of the fiscal year. This must be done by submitting a data update request in portable document format (pdf), which the taxpayer, or its legal representative, must sign.

Form and term for the presentation of the technical study and transfer pricing return

Taxpayers must annually submit the transfer pricing documentation, as well as the quantitative and qualitative summary of operations with related parties described in Article 7 of this resolution, through the Marangatu system, in accordance with the due date schedule established in general resolution No. 38/2020. Taxpayers who close the fiscal year on December 31 will have until July of the following fiscal year to comply with this rule. Taxpayers with a fiscal year close on April 30 will have to file no later than November of the following fiscal year.  Finally, taxpayers who end their fiscal year on June 30 will have to file before January of the following fiscal year.

Sanctions and penalties for noncompliance

In accordance with General Resolution 115-2022, noncompliance with transfer pricing obligations will bring penalties and sanctions that start at USD 140 and go up to the maximum level fine for failing to provide information that disproves the presumed relationship with foreign residents.

Transitory provisions

According to Article 18 of General Resolution 115, taxpayers that have closed their fiscal year as of April 30, 2021, June 30, 2021 and December 31, 2021, may request the inclusion of tax liability 957-ETPT until October 31, 2022, without the penalty for noncompliance with formal duties.

Extension for compliance for fiscal year 2021

Article 19 establishes an exceptional term for the submission of the technical transfer pricing studies, their working papers, as well as the quantitative and qualitative summary of the operations with related parties corresponding to the fiscal years that ended on April 30, 2021, June 30, 2021, and December 31, 2021 until October 31, 2022, before the SET’s intake desk in digital format, in an external storage medium—such as CD, DVD, or USB memory, in the file extensions previously indicated.

The due date for fiscal years ending on April 30, 2022 and June 30, 2022 will be governed by the provisions of Article 9 of General Resolution 115-2022, and must also be filed at the SET’s intake desk.

Extension for the submission of information that disproves the presumptive relationship with residents abroad

Taxpayers may exceptionally submit the information that disproves the presumptive linkage with residents abroad, corresponding to the operations carried out during the fiscal years 2021 and 2022, for taxpayers with fiscal year ending as of April 30, 2021, June 30, 2021, December 31, 2021, April 30, 2022 and June 30, 2022 must be submitted to the SET’s intake desk in PDF format between May and September of 2022, depending on the taxpayer’s fiscal-year closing date.

Licensed transfer pricing professionals

According to the resolution, authorized transfer pricing professionals must update their registration once the respective registration module is available in the Marangatu system. They must attach only in portable document format (.pdf extension) the registration certificate that the SET issued. In this case, the tax administration will issue a new registration certificate.

The authorized transfer pricing professional must then ratify the technical study that the taxpayer submitted through the “Marangatu” system using his or her own confidential user password.

The SET will consider the requirement to submit the taxpayer’s technical study once it receives the confirmation from the transfer pricing professional, for which purpose the taxpayer’s date of submission will be taken into account.

·       Francisco Arballo is a partner with Grupo Consultor EFE in Tijuana, Mexico.

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