What are Transfer Pricing? From the guidelines applied by the Organization for Economic Cooperation and Development (OECD), it can be inferred that they are “the prices at which a company transfers physical goods and intangible property, or provides services to associated companies”.
What are Transfer Pricing? From the guidelines applied by the Organization for Economic Cooperation and Development (OECD), it can be inferred that they are “the prices at which a company transfers physical goods and intangible property, or provides services to companies.
associated companies “.
The OECD establishes the general conceptual framework related to Transfer Pricing that most countries accept in their internal legislations. Chile has been a member of the OECD since January 2010 and, in that capacity, has gradually made the respective changes in order to adjust their legislation.
The fundamental principle that companies must respect in their operations is “full competition”, an issue that in business, too, should apply to those close to them. In this case, to related companies.
It is sought that in each country the fair and reasonable tax is paid with respect to commercial transactions made between cross-border related companies and those located in tax havens. Operations between cross-border related companies make it possible to raise or lower costs and profits. That is to say, they can locate the utilities in territories of lower taxation as well as, locate higher costs in places of higher impositions, facilitating in this way the circumvention at the international level.
In our legislation the most outstanding in terms of Transfer Price, dates from September 27, 2012 with the publication of Law 20.630 that introduces Art. 41 E, with specific modifications to the Transfer Price rules, which existed weakly. The SII is entitled to “challenge the prices, values or fixed returns, or establish them in the event of not having settled any, when cross-border operations and those that account for reorganizations or business or business restructurings that taxpayers domiciled, or residents or established in Chile, they are carried out with related parties abroad and have not been carried out
at normal market prices, values or returns. ”
Internal legal framework
After Law 20,630 that introduces Article 41 E, the following regulations of the SII can be highlighted: 31 of 01 of the year 2013. Exempt Resolution SII No. 14, establishes the obligation to present the Annual Informative Affidavit of Prices of Transfer. Form 1907. It is mandatory for the following
a) Those that as of December 31 of the reported year belong to the segments of Medium-sized Companies or Large Companies.
b) Those not classified in the previous segments, but, that have operations with persons domiciled or resident in a country or territory incorporated in the referred list of tax havens.
c) Those that are not included in the segments indicated above, in the period that corresponds to inform, have performed
of transactions with related parties without domicile or residence in Chile for amounts exceeding $ 500,000,000.
-14 of 06 of the year 2013. Circular No. 29, on the modifications made by Law 20,630, to the Transfer Price standards
contained in the LIR.
-24 of 12 of the year 2015. Exempt Resolution SII No. 110 establishes sworn statement 1913, of global tax characterization.
-12 of 05 of the year 2016. Circular N ° 31, on applicable sanctions.
Taxation on the determined differences
If the Service establishes the prices, values or normal market returns for the operations and these results correspond to a lower cost or expense or a higher profit of the taxpayer domiciled in Chile, said difference will be affected by a greater profit of the taxpayer in the year that performed such operations by taxing the Single Tax of 35%.
When the Service makes a tax settlement; On the differences that are determined, a fine equivalent to 5% on the amount of the price differences or differences will also be applied.
Penalties for non-compliance
Circular 31 establishes that the pecuniary penalty for taxpayers who do not present the 1907 Sworn Statement or the present one in an erroneous, incomplete or untimely manner will be from 10 to 50 Annual Tax Units, with a limit equivalent to the amount that is greater when comparing the 15% of the own capital determined pursuant to article 41 of the Law on Income Tax, with 5% of the effective capital of the taxpayer.