Transfer Pricing in Argentina, regulations and formal obligations required by the Federal Administration of Public Revenues (AFIP)

Transfer Pricing in Argentina, regulations and formal obligations required by the Federal Administration of Public Revenues (AFIP)

Transfer pricing rules in Argentina are mainly regulated by the Income Tax Law (“LIG”) and its respective amendments, being complemented and regulated by Decrees and General Resolutions Decree 1344/98, as well as General Resolution No. 1122, General Resolution 3132/2011, General Resolution 3476/2013, Law No. 27430 Article No. 6 and Decree 1170/2018.

The transfer pricing rule provides that the entity resident in Argentina must determine the arm’s length prices of international transactions entered into between taxpayers and related parties or parties domiciled abroad.

Obligated parties

In accordance with Article 5 of General Resolution No. 1122, the parties obliged to comply with the Transfer Pricing Regime and, therefore, to keep supporting documentation are those who:

Likewise, through General Resolution 4130-E, published in the Official Gazette on September 20, 2017, the Federal Administration of Public Revenues (AFIP) implemented a new annual information regime related to multinational groups, known as the Country by Country (CbC) report; which forms part of the international guidelines of BEPS Action Plan 13 (Erosion of the tax base and transfer of profits).

The new regime is aimed at the entity resident for tax purposes in Argentina that belongs to an MNE Group (multinational companies) and must present the report country by country in Argentina if (i) it is the controlling entity of the multinational group; (ii) it has been designated as a substitute entity by the controlling entity of the group; or (iii) if (a) the controlling entity is not required to submit the country-by-country report in its tax jurisdiction; or (b) if, being required to do so, that jurisdiction does not have an agreement with Argentina to exchange information regarding the report; or (c) even if such an agreement has been entered into, the other jurisdiction consistently fails to comply with its information exchange obligations.

The country-by-country report shall be submitted annually, until the last working day of the twelfth month immediately following the closing date of the fiscal year of the last reported controlling entity of the EMN Group.

Formal obligations

In accordance with the provisions of Article 6 of General Resolution No. 1122, added by the provisions of Article 1 of General Resolution 3476, taxpayers who carry out operations with related companies and are subject to the preparation of the transfer pricing report will be obliged to file the following returns:

The Master Report was introduced into the regulation by the promulgation of Decree 1170/2018. Regarding the Country by Country Report (CbC), it was introduced in Argentina in 2017; revenues must exceed EUR 750 million.

On December 6, 2019, the Federal Administration of Public Revenues postponed the due dates for the filing of affidavits for international transactions and transfer pricing, which originally were due between December 16 and 20, 2019, to the second week of February 2020. The new dates correspond to the years ending December 31, 2018.

The new general resolution will replace the current one, No. 1122, and it is also planned to develop a new system in a web environment with a single form (F 2668) for all operations.

With respect to general maturities as of the fiscal years ending in December 2019, they will occur in the 6th and 12th month following the end of the fiscal year for international operations and transfer pricing, and for the master report, respectively.

Penalties for non-compliance

Failure to submit the sworn statement within the time limit laid down by the AFIP is punishable by a fine of $10,000 to $20,000 – 3rd paragraph of Article 38.1 incorporated by Act 25,795 – if the taxpayer is a trust company, association or entity of any kind constituted in the country (no prior requirement is necessary). This fine does not provide for mitigation in the event of late compliance or voluntary payment. The fine is also applicable in the event that the taxpayer submits only the sworn statement without the transfer price report, although in this case there is a strong doctrine that the fine could be that laid down in Article 39 – first paragraph – of Act 11,683, which ranges from $150 to $2,500.

Failure to submit the affidavit and the Transfer Pricing report, after the requirement made by the AFIP, is punished with a fine that can reach up to $45,000 – Article 39, 2nd paragraph -. This fine may be accumulated with that described in the previous point. Finally, in the event that the AFIP reiterates the requirement and the taxpayer again omits the corresponding presentations and, in addition, has operations whose annual gross amount is equal to or greater than $10,000,000, it shall be punished with another fine whose minimum shall be $90,000 and maximum $450,000 – Article 39.1, 4th paragraph.

Likewise, failure to keep documentation is punishable by a fine of at least $150 and not more than $45,000 (Article 39 of Act 11,683).

Failure to comply with the country-by-country information regime, as well as the complementary regime, will result in the sanctions provided for in Article 38 and the one incorporated after Article 38 of Law 11,683 on Tax Procedures. Likewise, AFIP is empowered to (i) place the taxpayer in an increasing category of risk of being audited; (ii) suspend or exclude the taxpayer from the Special Tax Registries; (iii) suspend the processing of Exclusion or Non-Withholding Certificates requested by the taxpayer.