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 introduces 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, where this regime is covered 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, in 2018, Decree 1170/2018 is enacted, which amends the Income Tax Law Regulations, due to the reforms introduced by the aforementioned law.

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

Application Scope of Transfer Pricing

Pursuant to Article 15 of the Income Tax Law, as amended by Law No. 27430, and Article 2 of FAPR General Resolution 47147/2020, 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 scope of Transfer Pricing.

Regarding transactions with related parties, the aforementioned Resolution specifies as following:

1. Transactions with natural or legal persons, establishments, trusts domiciled or located abroad.
2. The transactions performed by the taxpayer 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, provided they are 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 Article 15 of the Law indicates when the linkage will be configured.

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

Another possibility is when the latter, for reasons of participation in the capital, level of accretion, functional influences or other, have the capability to guide the decisions of these subjects.

Likewise, Article 11 of the Regulations states that a linkage shall be deemed to exist when any of the following situations occur:

• All or a majority part of the capital of another is owned.
• Two or more subjects have another one in common which owns totally or in majority the capital of both, or which owns total or in majority the participation in the capital of one or more subjects and a significant influence in one or more subjects or has significant influence in 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 that is central to the activity of the other.
• The subject who jointly with another participates in an association, transitory union, condominium, among others without legal personality and has a significant influence in the price.
• When a subject agrees with other preferential clauses that differ from those stipulated with third parties in similar circumstances.
• A subject which participates significantly in the setting of business policies.
• The subject performs a relevant activity only with another, or its existence is justified only in relation to another.
• A subject provides, through mutual loans or guarantees, substantial funds for the development of the other subject’s activities.
• A subject is responsible for the losses of the other.
• When the management of a subject is vested in someone who has a minority equity participation.

Transfer Pricing Methods

In accordance with the third paragraph of Article 17 of the Law, in order to determine that the agreed prices comply with the market value, the most appropriate methods for the nature of the transaction will be used.

In turn, Article 21.4, paragraph 21 of the Regulations states what these methods shall be, listing the following:

• Comparable Pricing among Independent Parties Method
• Resale Price between Independent Parties Method.
• Cost plus Benefit Method.
• Profit Shifting method.
• Net Transaction Margin Method.
• Other Methods.

In the case of the other methods, the standard states they will be used in the case of intangible assets or investments in assets that do not have comparable transactions, provided that the other chosen method represents a better option than any of those listed above.

Transfer Pricing Affidavit in Argentina

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

Local File

This report 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 are required to file, provided that:

• The total amount of its transactions with related parties in a fiscal year exceeds $30,000,000 pesos, or
• The members of a Multinational Group who are required to file the Country-by-Country Report, in any jurisdiction, or Master File, when their transactions with related parties exceed a total amount of $3,000,000 pesos or individually $300,000 pesos.
• Taxpayers who perform transactions with subjects residing in non-cooperating jurisdictions or low or no tax jurisdictions, when the total amount of such transactions exceeds $3,000,000 pesos or individually $300,000 pesos.

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

Master File

This report will provide an overview of the business, structure of the multinational group, group activities, risks assumed, assets used, among others.

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

Filing the aforementioned Report will not be a requirement when:

• The group’s total consolidated revenue does not exceed two billion pesos ($2,000,000,000), in the fiscal year prior to the year of its filing. 
• Transactions with related parties do not exceed jointly, in the tax period, the amount of three million pesos ($3,000,000) or individually $300,000 pesos.

Country by Country Report

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

Pursuant to Article 2 of General Resolution No. 4,130/17, only the following parties are required to file this report:

• The last controlling entity of the Group, which is residing in Argentina.
• A so-called substitute entity resident in Argentina, which has been designated by the controlling entity for these purposes.
• The group member entity resident in the country. When the controlling entity is not required in its jurisdiction by this report, or when there is a Country-by-Country Report agreement with the jurisdiction of the controlling entity, but there is no agreement of competent authorities; or there is a systematic non-compliance with the reporting exchange agreement.

Reporting entities are excluded from the requirement when the consolidated revenues of the multinational group, in the fiscal year prior to the reporting year, is less than € 750,000,000.

Such reporting shall be filed via Form 8097 through FAPR’s website.

Form 2668

Pursuant to Article 47 of Resolution 4717/2020, entities who perform transactions with related parties or parties located in countries with low or no taxation, which in the last two fiscal periods prior to 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 that occurred in the period shall be reported.

Due Date of Affidavits

In the case of the Transfer Pricing Study and Form 2668, they must be filed until the sixth month after the closing date, according to the last digit of the TIN (Taxpayer Identification Number).

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

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 they are not required to file any affidavit.

Sanctions for Transfer Pricing Non-Compliance

The sanction for filing non-compliance of 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 pesos to $2,500.00 pesos.

On the other hand, Article 18 of the mentioned Law establishes the power of the AFIP to determine the tax obligations of taxpayers when they do not submit the respective informative sworn statements or do not present the transfer pricing report. In case the authority disagrees with the prices or considerations agreed by the taxpayer with its related companies, any difference must be added to the taxable income with updates, interests, and a fine that can range from 1 to 4 times the omitted tax.

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