In this article we want to answer the main doubts that arise regarding the new Regime: Do I meet the conditions to apply for the Simplified Regime ("RS")? Which information is required to complete the new form 2672 of the RS? If I adhere, is it necessary to have an analysis that proves that my operations were performed in an independent party basis?
To start answering these concerns, it is first important to remember which companies are covered by the Transfer Pricing Regulations. These are all companies that have carried out transactions with related entities and/or independent third parties resident in jurisdictions with low or no taxation ("JBNT"), or non-cooperating jurisdictions ("JNC"), if the total of such transactions exceeds, in the fiscal period to be reported, AR$ 3 million as a whole or AR$ 300,000 individually. On the other hand, those companies that have carried out import and export transactions of tangible goods with independent third parties NOT located in JBNT or PNC are also reached, if in the fiscal period to be reported the total of such transactions exceeds AR$ 10 million.
However, those companies that fall within the scenarios detailed in the preceding paragraph, although they are covered by the Transfer Pricing Regulations, as long as they comply with the conditions set forth in General Resolution 5010/2021 ("RG 5010") they may choose to formalize such obligations through the Simplified Regime for International Transactions.
Which companies are eligible to join this RS?
RG 5010 defines 4 situations in which the taxpayer may opt for the RS.
1) When the total turnover of the taxpayer during the fiscal year to be reported is less than AR$ 2,588,770,000 (which corresponds to the highest amount established for the medium category tier 1), as established in point A of Annex IV of Resolution No. 220/2019, as set forth in RG 5010).
If your company meets this condition, it is necessary to verify that:
a) It does not report recurring negative results in the fiscal year to be reported and in the two immediately preceding fiscal years;
b) It has not undergone a business restructuring process in the fiscal year to be reported and in the two immediately preceding fiscal years;
c) It does not carry out transactions with related parties and/or domiciled in JBNT or JNC, which involve royalties, license rights or research and development agreements for a total amount exceeding AR$ 25,887,700;
d) It does not carry out transactions for the rendering or acquisition of services with related parties and/or third parties based in JBNT or JNC, for an amount that, in the aggregate, represents more than one percent (1%) of the total turnover of the local entity; and
e) The taxpayer is not a giver or taker of loans with foreign related parties.
In case the taxpayer does not comply with the above situations, as established by RG 5010, in spite of fulfilling point 1, the taxpayer will not be able to opt for the RS.
2) When the total of its international transactions with related parties does not exceed 2.50% of its total turnover, subject to additional compliance with the following conditions:
a) It does not carry out transactions with related parties and/or domiciled in JBNT or JNC, which involve royalties, license rights or research and development agreements for a total amount that together exceeds the 0.50% of its total invoicing;
b) It does not report recurring negative results in the fiscal year to be reported and the two immediately preceding fiscal years;
c) It has not undergone a business restructuring process in the fiscal year to be reported and in the two immediately preceding fiscal years; and
d) It has not carried out import and/or export operations with the intervention of an international intermediary.
3) An exempted entity listed in paragraphs b), d), e), f), g), l) or p) under Article 26 of the Income Tax Law and has an exemption certificate issued by AFIP.
4) When it carries out import and/or export operations of tangible goods with independent parties (not located in JBNT or JNC) whose annual amount -per fiscal year- as a whole is higher than AR$ 10,000,000 and lower than AR$ 60,000,000.
Furthermore, it is important to point out that RG 5010 establishes that the following taxpayers are excluded from this RS:
1) Those who are part of Multinational Groups of Companies that must file the "Country by Country Report" -whichever the jurisdiction where they have to comply with such obligation-; and/or.
2) Those who are obliged to file the "Master File" or who may choose to file a note in the form of a affidavit.
Which information is required to fill out the new RS Form 2672?
This form will require the following information:
1. Regarding the Multinational Enterprise Group to which the taxpayer belongs to:
a) Up to date composition of the enterprise group, detailing the role of each one of the companies.
b) Partners or members of each of the companies, indicating the percentage of the capital stock its ownership represents.
c) The place of residence of each of the partners and members of the group's companies, except for the part of capital subscribed under a public offering through stock exchanges and markets.
d) Full name of the president or whoever has held an equivalent position during the last THREE (3) years within the economic group, indicating its place of residence.
e) Stock transfer, capital increase or reduction, stock purchase, merger agreements and any other agreement in which the local taxpayer may be directly or indirectly involved in.
2) Identification of the ultimate parent company: Unique Taxpayer Identification Number (CUIT)
or in case of being a foreign subject: Tax Identification Number (N.I.F.). In the case of foreign subjects, indicate the month of the end of the fiscal year.
3) Identification of the activities carried out by the local subject and members of the group.po.
4) Transactions with related entities and/or with third parties located in JBNT or JNC during the fiscal year to be reported:
a) Specify the type of operation by entity;
b) Provide the total annual amount involved (expressed in pesos and in U.S. dollars); and
c) Specify the transfer pricing adjustments, if applicable.
5) Import and export transactions of tangible goods with independent parties (not domiciled in JBNT or JNC)..
6) Identification of the foreign parties with which the taxpayer has carried out the reported transactions,
In case the taxpayer has carried out cross-border financial transactions, the following information must be provided:
1) Identifying data and geographical location of the lessor and lessee of the loan.
2) Intended use of the received funds, if applicable.
3) Respecto de las operaciones financieras:
a. Principal amount
b. The date of agreement and maturity date for the total cancellation of the principal.
c. The type of interest rate (fixed, variable, etc.) and its percentage value.
d. Existence of interest payment, if applicable.
e. Existence of guarantees and financial guarantees.
f. Source of the interest payments.
g. Penalty clauses or clauses that determine how to proceed when the alleged debtor fails to pay on the maturity date or when it requests postponing the maturity date.
If I adhere to the RS, is it necessary to have an analysis which supports that my operations were carried out as between independent parties?
Since one of the items to be reported on Form 2672 refers to transfer pricing adjustments, if applicable, it is understood that in order to determine whether such adjustments are applicable and the amount, if any, it is necessary to have an analysis for each transaction to be reported.
On the other hand, it is important to highlight that RG 5010 establishes that those who opt for the Simplified Regime and that the transactions included in such regime exceed, in the tax period, the amount equivalent to AR$ 3,000,000 as a whole, or individually the amount of AR$ 300,000, are liable to submit the Transfer Pricing Study and the respective working papers, within 45 days of being notified, in the event that AFIP considers that there are conditions that justify it.
Some questions...
In summary, although the RS favors SMEs or companies belonging to small multinational groups, there are several requirements to be fulfilled that can make it unenforceable.
In addition, there are still some uncertainties:
Should the amount of total turnover to be considered be compared with the amount provided for in point A of Annex IV of Resolution No. 220/2019, which corresponds to the year-end or with the amount in force at the time of publication of RG 5010?
Is the result to be considered the operating result or the final result of the fiscal year?
In order to apply the RS the taxpayer must not operate with international intermediaries. Does it refer to related parties or does it also include third parties?
When will Form 2672 be available?
For further details or review of particular cases, we will be glad to assist you.
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