This article briefly describes the transfer pricing regime in Paraguay, addressing its application scope, linkage rules, methodology, formal obligations and penalties for non-compliance.
This is also known as the “Arm’s Length Principle” that seeks the prices established among related parties are in accordance with objective market prices, such like an agreement among independent parties. The Law has adopted such definition in its article 35, so the pricing agreement with their related parties must be taken into consideration by the taxpayers of the Impuesto a la Renta Empresarial or Corporate Income Tax (IRE).
It should be noted that the term person includes individuals, legal entities, permanent establishments and domestic or foreign trusts.
It should also be mentioned that related parties of a resident entity in Paraguay will also be considered to be those resident subjects located in low or zero tax jurisdictions, including free trade zones and companies where labor intensive manufacturing is employed.
Likewise, according the aforementioned guidelines, the Paraguayan Transfer Pricing Standard establishes an order of priority for the use of such methodologies.
Thus, with the exception of internationally traded goods, which must be analyzed under the methodology of item 7, the method indicated in item 1 must be used first for all other transactions.
Likewise, in accordance with Article 27 of the Regulations, the Technical Study must contain the following information: