Author: admintp

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Transfer Pricing

Simplified Regime for International Operations and Amendments to RG AFIP 4717/2020

On June 18, 2021, was published in the Official Gazette the Federal Administration of Public Revenues (“AFIP“) General Resolution 5010/2021 (“RG 5010“), applicable to fiscal years ending on December 31, 2020 and thereafter, the main purpose of which is to establish the implementation of a Simplified Regime for International Transactions (“Simplified Regime”), and to extend for 3 (three) months the Transfer Pricing (“TP”) filing due dates, moving them to the end of next September.

Additionally, RG 5010 establishes that the Simplified Regime will be formalized through the filing of the affidavit form F.2672, and modifies the TP regulations (amending RG 4717/2020), especially providing that the forms F.2668, F.2672, and the Transfer Pricing Study corresponding to tax periods ended between 12/31/2020 and 12/31/2021, both inclusive, may be filed until the ninth month after the end of the respective fiscal year, according to the last digit of the taxpayer’s Tax ID (C.U.I.T.), from the 23rd to the 27th day of the month. The latter is established as a transitory provision and on an exceptional basis due to the COVID-19 pandemic. After that, the due dates will operate on the sixth month after the end of the fiscal year, from the 23rd to the 27th day.

Those who wish to adhere to the Simplified Regime must file the affidavit form F.2672 stating that their international transactions with related parties, or third parties located in non-cooperative or low tax jurisdictions or countries[1], have been agreed as if they had been carried out between independent parties, without the intervention of an international intermediary.

RG 5010stipulates that the following subjects shall be excluded from the Simplified Regime:

  • Those that are part of Multinational Group of Companies (“MGC”) that are required to file the “Country by Country Report” (CbCR)[2], regardless of the jurisdiction in which they have to comply with such obligation; and/or
  • Those obliged to submit the Master File (MF)[3] or, a statement in the form of an affidavit confirming there were no significant changes with regards to the MF filed with AFIP in previous years; and/or
  • Those who operated with the intervention of International Intermediaries.

Thresholds and conditions established to be eligible for the Simplified Regime for International Operations (compliance with any of the following four situations): 

1. Annual revenues lower than the highest amount established for the medium-sized category tier 1[4], whatever the activity, provided for in RG 220/2019, Annex IV, point A of the former Secretariat of Entrepreneurs and Small and Medium-sized Enterprises (“SEyPME“) and amendments thereto, together with:

1.1 Not having recurrent negative results in the Financial Statements corresponding to the fiscal period to be reported nor in the two immediately preceding ones;

1.2 Not having undergone a business restructuring process in the fiscal year to be reported nor in the two immediately preceding ones;

1.3 Not having performed transactions with related parties and/or parties located in non-cooperative or low tax countries and jurisdictions, involving royalties, license rights or research and development agreements for a total aggregate amount that exceeds 1% of the amount of revenues established in point 1;

1.4 Not having performed operations of rendering or acquisition of services with parties related to and/or located in non-cooperative or low tax countries and jurisdictions, for an aggregate amount that represents more than 1% of the total revenues of the local subject; and;

1.5 Not having entered into loan agreements with related parties located abroad.

2. Total amount of international transactions with related parties amounting to less than 2.50% of the total revenues, while meeting all of the following requirements:

2.1 No having performed transactions with related parties and/or parties located in non-cooperative or low tax jurisdictions or countries involving royalties, licensing rights or research and development agreements for a total aggregate amount that exceeds 0.50% of its total revenues;

2.2 Same requirement as point 1.1 above;

2.3 Same requirement as point 1.2, above; and

2.4 Not having performed import and/or export operations with the intervention of an international intermediary.

3. Being an exempt entity with the respective certificate of exemption in force.

4. Regarding import and/or export operations with independent parties, when the aggregate annual amount is higher than ARS10,000,000 and lower than ARS60,000,000.

The due date of the Simplified Regime will take place between the 23rd and the 27th day of the sixth month after the fiscal year end, according to the last digit of the taxpayer’s Tax ID.

Those who choose to adhere to the Simplified Regime will not be required to file the TP Study nor the annual affidavit form F.2668.

Amendments to RG 4717/2020 (General TP Regime)

1. Filing of the TP Study: must be complied with by those parties that carry out transactions with related parties or with third parties located in non-cooperative or low tax countries and jurisdictions exceeding the total aggregate amount equivalent to ARS3,000,000 or ARS300,000 per transaction, thus eliminating the previous ARS30,000,000 threshold established by RG 4717/2020, Section 44, subsection a), point 1.

2. Master File: those taxpayers that belong to MGC must file the MF when the following circumstances are jointly verified:

2.1 The total consolidated annual income of the MGC exceeds ARS4,000,000,000 in the fiscal year prior to the filing date; and

2.2 The transactions carried out with related parties abroad during the fiscal period under analysis, the total aggregate amount equivalent to ARS3,000,000 or the individual amount of ARS300,000.

In the event that there were no changes within the reported period with respect to what was included in the preceding MF submitted, the taxpayer may choose to submit a sworn statement ratifying said information and attaching a copy of the Financial Statements of the Ultimate Parent Company.

[1] Low or no tax Jurisdictions or Countries (commonly called Tax Havens): are those jurisdictions or countries whose income tax rate is less than 15%.

[2] An MGC is obliged to file a CbCR if its consolidated revenues are higher than EUR750 million.

[3] Argentine taxpayers obliged to submit MF: those belonging to economic groups whose UPC has obtained consolidated income for the fiscal year prior to the reporting period greater than the sum of ARS4,000,000,000 (four billion Argentine Pesos).

[4] Highest amount of the “Medium-size Category Tier 1”: as of 31 December 2020, was ARS1,821,760,000. Amount pursuant to Res. 69/2020 of the Secretariat of Small, Medium Enterprises and Entrepreneurs (”SSME&M”) (formerly “SEyPME”). This amount rises to ARS2,588,770,000 as of April 1st, 2021 onwards, pursuant to Res. SSME&M 19/2021.

Categories
Taxes

AFIP focuses on Argentine companies belonging to Multinational Groups

Argentina is adapting its Transfer Pricing and related Information Regimes to international standards, mainly based on the document issued by the Organization for Economic Cooperation and Development (“OECD”) in 2015, which details an exhaustive action plan to prevent base erosion and profit shifting, known as “BEPS”. In this sense, the Federal Administration of Public Revenues (“AFIP”) puts rigor to compliance with General Resolution 4130-E/2017 (“G 4130”), through requirements to taxpayers for lack of compliance with said information regime.

GR 4130 established the following obligations:

1) Information Regime for Argentine entities which are part of a Multinational Group of Entities MGE.

2) Country by Country (CBC) Report filing.

3) Confirmation of the CBC Report filing in other jurisdictions, other than Argentina.

The mentioned obligations are applicable to all the ultimate parent entity of the MGE’s fiscal years beginning 01/01/2017.

1) INFORMATION REGIME FOR ARGENTINE ENTITIES WHICH ARE PART OF MGE

(FORM F.8096) – GR 4130 – SECOND TITLE

Who is obliged to file Form F.8096?

All the Argentine entities that are part of an MGE should comply with this information regime.

An MGE is any group of entities related through the ownership or the direct or indirect control, that is either obliged to prepare consolidated financial statements or would be so obliged if equity interests in any of the enterprises were traded on a public securities exchange, which includes at least 2 (two) or more entities located in different tax jurisdictions, or an entity located in one tax jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment of its property in another jurisdiction.

When a MGE has more than one Argentine entity taking part of it, it could delegate to one of them the filing of this Form (“member entity”).

Content of the Form F.8096

Due date

The form F.8096 could be filed by the last working day of the third month after the ultimate parent entity’s fiscal year to be informed ends. For example, if the ultimate parent entity’s fiscal year end was 12/31/2017, this form could be filed by 03/29/2018.

Sanctions

The failure to file this form or filing it partially, e.g.: without informing which the ultimate parent entity is, would constitute grounds for AFIP to apply the following fines[1]:

  1. If the total annual consolidated revenues of the MGE, accrued during the previous fiscal year before the one to be informed, is equal to or higher to EUR 750,000,000[2] (seven hundred and fifty million euros): the fine could range between ARS 80,000 (eighty thousand Argentine pesos) and ARS 200,000 (two hundred thousand Argentine pesos)[3].

The mentioned fine would also be applicable if the reporting entity is not informed.

  1. If the total annual consolidated revenues of the MGE, accrued during the previous fiscal year before the one to be informed, is lower than EUR 750,000,000[4] (seven hundred and fifty million euros): the fine could range between ARS 15,000 (fifteen thousand Argentine pesos) and ARS 70,000 (seventy thousand Argentine pesos)[5].

 

  • CBC REPORT FILING (FORM F.8097) – GR 4130 – FIRST TITLE

Threshold

The MGE with a total consolidated revenue, accrued during the previous fiscal year before the one to be informed, equal to or higher than EUR 750,000,000[6] (seven hundred and fifty million euros) must file the CBC Report.

Who is obliged to file Form F.8097?

The ones that are obliged to file Form F.8097 are listed below:

  1. The Argentine ultimate parent entity.
  2. An Argentine surrogate entity, designated by the ultimate parent entity for the filing of the CBC Report on its behalf. The only ones that could act as surrogate entities are:
  3. Entities which have a shareholders’ equity that is equal to or higher than ARS50,000,000 (fifty million Argentine pesos); or
  4. Entities which have an operative and/or functional structure in-line with the processes that have to be performed so as to obtain all the information needed to file the CBC Report.
  5. An Argentine member entity, that is not mentioned above, as long as it complies with at least one of these criterions:
  6. The ultimate parent company is not obliged to file the CBC Report.
  7. At the due date established by the AFIP for the filing of this form, the tax jurisdiction where the ultimate parent company is located has not yet signed an agreement of “qualifying competent authority” in which Argentina is part of, even though both tax jurisdictions are parties to an international treaty.
  8. The tax jurisdiction where the ultimate parent company is located is not complying with the agreement of “qualifying competent authority” signed with Argentina.

When an MGE has more than one Argentine entity taking part in it, it could delegate to one of them the filing of this Form (“member entity”).

When an Argentine entity takes part in more than one MGE that is obliged to file the CBC Report, if the Argentine entity complies with one or more of the criterions listed above, it has to file one Form F.8097 for each one of the MGE it takes part in.

Moreover, if the CBC Report was filed by a non-Argentine surrogate entity designated by the ultimate parent company to do so, with the tax jurisdiction where the surrogate entity is located, the entities mentioned in paragraph c) above, are not obliged to file the Form. F.8097, as long as that tax jurisdiction:

  1. Has established an information regime for the CBC Report filing, in accordance with the provisions of the GR 4,130.

 

  1. Has signed an agreement of “qualifying competent authority” in which Argentina is party to, at the due date established by the AFIP for the filing of this form.
  2. Is complying with the agreement of “qualifying competent authority” signed with Argentina.
  3. Has been informed by the surrogated entity that it was designated by the ultimate parent company to file de CBC Report in this tax jurisdiction.

Content of the Form F.8097

[1] Section 192, par. a)i) and par. a)ii) – Law 27,430 (Tax Reform Law), in force since 12/29/2017.

[2] Idem footnote 2.

[3] The fine could range between USD 4,000 and USD 10,000, considering a currency exchange rate of

USD 1 = ARS 20.

[4] Idem footnote 5.

[5] The fine could range between USD 750 and USD 3,500, considering a currency exchange rate of

USD 1 = ARS 20.

[6] Idem footnote 7.

Due date

The form F.8097 could be filed by the last working day on the twelfth month after the ultimate parent company’s fiscal year to be informed ends. For example, if the ultimate parent company’s fiscal year end was 12/31/2017, this form could be filed by 12/31/2018.

Sanctions

The failure to file this form, doing so it after its deadline, filing it partially or submitting information that is incomplete, wrong, or inconsistent, would constitute grounds for AFIP to apply a fine that could range between ARS 600,000 (six hundred thousand Argentine pesos) to ARS 900,000 (nine hundred thousand Argentine pesos).[1]

  • CONFIRMATION OF THE CBC REPORT FILING IN OTHER JURISDICTION,

DIFFERENT FROM ARGENTINA

The Argentine entities that take part in an MGE must confirm that the CBC Report was filed in the tax jurisdiction that was informed in Form F.8096.

Due date

This information could be submitted by the last working day of the second month after the due date for the filing of the CBC Report. For example, if the due date operates on 12/31/2018, the Argentine entities could confirm the filing of the Report by 02/28/2019.

Sanctions

Failure to confirm the filing of the CBC Report would constitute grounds for AFIP to apply a fine that could range between ARS 80,000 (eighty thousand Argentine pesos) and ARS 200,000 (two hundred thousand Argentine pesos).[2]

 

Other Sanctions

Beside the sanctions mentioned in the Annexes, failure to comply with these regulations could result in the application of the following penalties:

Operative Penalties

  1. The Argentine entities could be included in a higher category of the Risk Perception System (“Sistema de Percepción de Riesgo – SIPER”), governed by the General Resolution 3,985 issued by AFIP, thus it increases the possibility of a tax audit.
  2. The Argentine entities could be suspended or excluded from the Special Tax Registries (“Registros Especiales Tributarios”) in which they are enrolled.
  3. The AFIP could suspend the process to obtain Exclusion or Non Withholding Certificates (“Certificados de Exclusión o de No Retención”), in accordance with legislation in-force.

 

Formal Penalties

The failure to comply with AFIP’s requirements would constitute grounds for AFIP to apply the following fines:

  1. CBC Report complementary information requirements: the fine could range between ARS180,000 (one hundred eighty thousand Argentine pesos) and ARS 300,000 (three hundred thousand Argentine pesos)[3].
  2. Form F.8096 and/or F.8097 filing requirements: ARS 200,000 (two hundred thousand Argentine pesos). This fine could be combined with the ones mentioned in the Annexes regarding the forms F.8096 y F.8097.[4]

[1] Section 192, par. b) – Law 27,430 (Tax Reform Law), in force since 12/29/2017. The fine could range between USD 30,000 and USD 45,000, considering a currency exchange rate of USD 1 = ARS 20.

[2] Section 192, par. a) iii) – Law 27,430 (Tax Reform Law), in force since 12/29/2017. The fine could range between USD 4,000 and USD 10,000, considering a currency exchange rate of USD 1 = ARS 20.

[3] Section 192, par. c) – Law 27,430 (Tax Reform Law), in force since 12/29/2017. The fine could range between USD 9,000 and USD 15,000, considering a currency exchange rate of USD 1 = ARS 20.

[4] Section 192, par. d) – Law 27,430 (Tax Reform Law), in force since 12/29/2017. The fine would be USD 10,000, considering a currency exchange rate of USD 1 = ARS 20.

Categories
Taxes

Countries or Jurisdictions with Low or Null Taxation

In 2017, through Law 27.430, amendments were introduced in the Income Tax Law (ITL) (Decree 824/19). Among these amendments, article 20 was incorporated, providing the following:

“For all purposes provided for in this law, any reference to “jurisdictions with low or null taxation” shall be understood as referring to those countries, domains, jurisdictions, territories, associated states or special tax regimes that establish a maximum income tax rate of less than sixty percent (60%) of the rate referred to in article 73 (a) of this Law.”

The rate referred to in article 73 of the ITL is 25%. At the same time, Decree 862/2019, ruling the ITL, in its article 25 establishes:

“For the purpose of determining the level of taxation referred to in article 20 of the ITL, the total tax rate, in each jurisdiction, levied on business income shall be considered, regardless of the levels of government that established it.”

 

“Special tax regime” means any specific regulation or scheme which departs from the general income tax regime in force in that country and which results in an effective rate lower than that established in the general regime.”

In accordance with the foregoing and having established the regulatory framework on which the definition of Country or Jurisdiction of Low or Null Taxation (CJLNT) is based, it can be concluded that those taxpayers whose income tax rate is less than 15%, qualify as such (having determined said limit by application of 60% on the rate of 25%, whether it is a jurisdictional level lower than the national one, or a special taxation regime).

Consequently, it remains on the taxpayer’s side to check or inquire about the income tax rate applicable in the jurisdictions with which it operates, and therefore to determine whether Transfer Pricing (TP) obligations apply.

Determining the effective tax rate of certain countries or jurisdictions often turns out to be quite difficult since in the absence of public information, taxpayers may have to request support from independent customers or suppliers, with the bureaucratic burden that this entails, or the lack of response on many occasions. In turn, leaving this responsibility on the taxpayer’s side may lead to omitting to consider certain jurisdictions CJLNT. For example, in cases where language difficulties may arise, or where exists a diversity of rates within the same territory, among other complexities.

So far, although it has leaked out that AFIP will issue a General Instruction for internal use with the list of CJLNT, taxpayers and professionals in the field would expect the publication of an exhaustive list that extinguishes the existing uncertainty in this regard and at the same time allows to develop best practices for the fulfillment of TP obligations.

Categories
Transfer Pricing

AFIP´s Compliance Requests

A few days ago, AFIP began an extensive campaign of requirements to taxpayers for compliance with two Information Regimes related to Groups of Multinational Entities (MNGE). It is, on the one hand, the Register of Related Parties, and on the other, the Information Regime for entities that are part of a GEMN.

As for the Register of Related Parties, it is an information regime that had been implemented by AFIP in 2013 (General Resolution “GR” AFIP 3572/2013) with two chapters. Chapter I consisted of a web service created to register all related parties (domestic or foreign) (“the Registry”); while Chapter II requested to report domestic transactions with related parties, through a monthly affidavit (F.4502).

Although this information regime was in force, many taxpayers chose not to submit it, given the excessive workload it represented, to the extent that the report of local transactions (Chapter II) was somehow deprecated, and was finally derogated by AFIP in 2019. After this modification, only the registration obligations established in Chapter I remained in force, as well as those to keep the Registry up to date. Within 10 days of the occurrence, any event that configures a change relating to the local or foreign related subjects shall be registered.

The Registry regained relevance since the new regulatory framework of the Transfer Pricing regime after the sanction of the GR AFIP 4717/2020, where the uploading of the related parties to the annual Transfer Pricing (“TP”) Return form F.2668 is automatically absorbed from the Registry, thus forcing it to be kept updated.

Regarding the Information Regime for taxpayers belonging to a MNGE, it has been in force since 2017, according to GR AFIP 4130-E/2017, and requires local taxpayers who have the status of belonging to a GEMN to report who their Ultimate Parent Entity (“UPE”) is, consolidated revenues of the MNGE and other formal data regarding said entity.

In addition, the aforementioned GR also regulates the submission of Country-by-Country Reports, aligning Argentina with the international standards arising from the OECD’s BEPS Plan.

In this sense, the gaze of the tax authorities worldwide is increasingly shifting from the individual taxpayer and focusing on the MNGE. AFIP has done the same and began requiring taxpayers to complete this information regime by filing form F.8096. This is a relatively simple form to complete, but its non-compliance can lead to significant fines.

From the above, it is important to keep both informative regimes up to date, in order to avoid fines or having to comply with AFIP requirements within very short deadlines, with the difficulties that may entail gathering information from related companies and the UEC.