Taxpayers should review their operations in light of the changes introduced in the transfer pricing rules.

On June 18, 2021, the Argentine federal tax authorities (AFIP) published, in the Official Gazette, General Resolution 5010/2021 (GR 5010), which includes changes to the transfer pricing (TP) regulations established by General Resolution 4717/2020 (GR 4717), extends the due dates for TP filings and introduces a simplified regime for international transactions. For more information on GR 4717, see Tax Alert 2020-1407.

Background

On May 15, 2020, AFIP published GR 4717, containing the regulations implementing the long-awaited TP provisions enacted as part of the tax reform in December 2017. The regulations mainly cover the filing of the TP report (local file) and master file. Additionally, the regulations introduced definitions and requirements for intercompany transactions involving Argentine companies.

General Resolution 5010

GR 5010 includes changes to the TP regulations established by GR 4717, extends the due dates for transfer pricing filings and introduces a simplified regime for international transactions.

Changes to GR 4717

In a divergence from the OECD Transfer Pricing Guidelines and most countries' rules, GR 5010 adds a new rule stating that taxpayers cannot use an entity with operating losses as a comparable for TP purposes, unless the taxpayer (1) adequately justifies that the losses are a characteristic of the business, due to market circumstances, industry or other comparability criteria; and (2) demonstrates that the conditions leading to the losses are not the result of factors affecting comparability.

In addition, the new rules modify the minimum requirements for the submission of the transfer pricing study and master file as follows:

• Taxpayers with transactions with foreign related parties or third parties domiciled in non-cooperating jurisdictions or low-tax or no-tax jurisdictions for over ARS3,000,000 (approx. US $30,000) in total or ARS300,000 (approx. US $3,000) per transaction must submit the transfer pricing study (Form 4501).
• Taxpayers that are part of a group of multinational entities (according to Argentine country-by-country report definitions) and comply with the following requirements must submit the master file:

• Taxpayers that exceed in the prior tax year ARS4 billion (approx. US $40 million) of consolidated annual income at the multinational group level
• Taxpayers with transactions with foreign related parties for amounts over ARS3 million (approx. US $30,000) in total or ARS300,000 (approx. US $3,000) per transaction

GR 5010 establishes that the master file may be substituted with a sworn statement attached to the group's applicable tax year consolidated financial statements ratifying that there are no modifications to the information previously reported in the last master file, provided the taxpayer complied with the requirement to file the master file or sworn statement for the prior tax period.

The new regulations include a special provision for tax years ended from December 31, 2020 to December 31, 2021. Under that provision, taxpayers must consider the suitability of the comparables selected, and the financial information provided, in their TP filings within the framework of the COVID-19 pandemic, for the same period (i.e., a tax year ended from December 31, 2020 to December 31, 2021) under analysis and in accordance with the recommendations available on the microsite "International Operations" of AFIP's website.

Compliance obligations due dates

Form 2668 and the TP report for tax years ending December 31, 2020 to December 31, 2021 were due from the 23rd to the 27th of the sixth month following the year-end. GR 5010 extends the filing due dates of those tax years from the 23rd to the 27th of the ninth month following the year-end. For tax years ending after December 31, 2021, the filings will be due as from the 23rd to the 27th of the sixth month following the year-end.

Simplified regime for international transactions

GR 5010 establishes a simplified regime for international transactions, under which the taxpayer is relieved of filing Form 2668 and the TP study.

To opt for this simplified regime, the taxpayer must comply with one of the following conditions in the tax year for which the taxpayer is reporting:

1. Have total annual revenues lower than the highest amount established for the category "medium-sized tranche 1" as set forth in point A of Annex IV of Resolution No. 220 of the former Secretariat of Entrepreneurs and Small and Medium-Sized Enterprises (approx. US $25,887,700) and compliance with all the following requirements:
• The taxpayer did not have recurring losses in the tax year to be reported and the two immediately preceding tax years.
• The taxpayer did not undergo a business restructuring in the tax year to be reported and the two previous tax years.
• The taxpayer did not carry out transactions with related parties or parties domiciled in non-cooperating jurisdictions or low-tax or no-tax jurisdictions involving royalties, the licensing of rights or research, and development agreements for an amount greater than 1% of the abovementioned highest amount established for the "medium-sized tranche 1" category.
• The taxpayer did not render or receive services with related parties or parties domiciled in non-cooperating jurisdictions or low-tax or no-tax jurisdictions for more than 1% of its total revenue.
• The taxpayer did not receive loans from, or grant loans to, foreign related parties.
2. Have total annual revenue from foreign related parties not exceeding 2.5% of the total revenue of the taxpayer and compliance with all the following requirements:
• The taxpayer did not have recurring losses in the tax year to be reported and the two immediately preceding tax years.
• The taxpayer did not undergo a business restructuring process in the tax year to be reported and the two previous tax years.
• The taxpayer did not carry out transactions with related parties or parties domiciled in non-cooperating jurisdictions or low-tax or no-tax jurisdictions involving royalties, the licensing of rights or research, and development agreements for an amount greater than 0.5% of its total revenue.
• The taxpayer did not carry out import and export transactions involving an international intermediary.
3. Be an exempt entity in accordance with sections b), d), e), f), g), l) and p) of Article 26 of the Income Tax Law and have an exemption certificate issued by AFIP
4. Be an importer or exporter of goods with third parties for an annual aggregated amount greater than ARS10 million (approx. US $100,000) and less than ARS60 million (approx. US $600,000)

Additionally, GR 5010 excludes from the simplified regime taxpayers that meet any of the two following conditions:

• Companies belonging to multinational groups that must file the country-by-country report.
• Companies required to file the master file or choose to file the sworn statement, as established in the new Article 45 of GR 4717.

Taxpayers that opt for the simplified regime must file "F. 2672 International Transactions Simplified Regime" for the tax year being reported, stating that the prices of their transactions have been agreed to as if they had been carried out between independent parties, without the intervention of an international intermediary. GR 5010 Annex 1 sets out the information taxpayers must include in Form F. 2672. The filing due date is the same as the due date for Form 2668 and the TP report.

Entities eligible for the simplified regime with operations that exceed the minimum requirements established in GR 5010 for the submission of the transfer pricing study for the tax year being reported, must submit the transfer pricing study with the respective working papers within 45 days of being notified by AFIP of the obligation to submit the transfer pricing study.

Implications

Companies doing business in Argentina should carefully assess the new TP regulations, especially considering the rule rejecting operating loss comparables and the TP filing obligations.

———————————————