Transfer Pricing Guatemala
As the business world becomes increasingly global, transfer pricing has become one of the major issues causing concern for companies which possess cross-border operations. To find out about transfer pricing in Guatemala and the issues that surround it, Lawyer Monthly speaks to Ruby Asturias, regional partner of the law firm, ACZALAW, in Guatemala City.
Please can you give me an overview of transfer pricing in your country currently?
Guatemala did not have legislation on transfer prices until March 2012 when Decree 10-2012 “Law Updating Tax Regulations” was enacted, and which establishes Standards for Special Valuation between Parties. This Decree will become effective in January, 2013.
The approval and implementation of the new legislation is a very important step on tax matters because the State wants to adjust and standardize tax regulations to simplify implementation and understanding by the taxpayers. This would also result in a more efficient administration and control of tax collections.
In general terms, the regulation of transfer prices is to achieve free competition in operations. The purpose of the Office of the Superintendent for Tax Administration (SAT) is to verify if the operations conducted among related parties have been valued under the principle of free competition. It is important to point out that the legislation on transfer prices is oriented to verify that the prices paid by or collected from their related affiliates or home offices are within the parameters of market prices for the same goods or services paid to, or collected from, a non-related entity, this is to avoid that prices between affiliated or related companies are deliberately altered to evade or reduce taxes.
What are the main legal challenges raised by your jurisdiction’s transfer pricing policies?
Some of the challenges for the implementation of these standards include:
a)Establishment of the principle of free competition;
b)Determination of the value of operations conducted between related parties;
c)Eliminate tax evasion;
d)Implement the culture of transparency in the tax returns, through implementation of adjustments when value agreed by the parties results in reduced taxes in the country or using a different assessment;
e)Keep a tax control on the transfer prices and ensure a taxable base.
f) Respect and comply with OCDE’s principles and with international standards;
g)Guarantee rule of law to taxpayers and tax authorities, eliminating the risk of double taxation and creating opportunities for fiscal planning for taxpayers.
One of the biggest challenges will be handling fiscal information, because in Guatemala legal provisions in force should be analyzed regarding the possibility of accessing data bases of foreign trade under the responsibility of SAT, and taking into consideration that our legislation provides taxpayers standards and guarantees of confidentiality on tax and accounting information.
Is there anything else you would like to add?
It is important to mention that SAT created a Department for International Control in charge of controlling the prices charged by multinational companies incorporated in the country and their home offices, affiliates or branch offices abroad, so that these prices are not below the market or are charged to companies that are not affiliates nor related, to prevent an effect on taxes to be paid.
To achieve an integral application of standards for transfer prices it is necessary that our fiscal authorities do not apply erroneous or discretional criteria on a case by case basis and that in the event of doubt in the application or interpretation of the new standards; they apply OCDE’s standards on Transfer Prices.
In a comparative legal analysis and as an example we can mention that El Salvador has implemented these regulations since January 2010, in Honduras these will be implemented in 2014; in Costa Rica Congress is discussing some initiatives to standardize transfer prices which are contained in the Projected Law on Tax Solidarity and Panama already applies systematically principles and standards in transfer prices which were approved in 2010 and implemented in 2011 reserved only to such countries with which Panama has executed treaties to avoid double taxation.
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