stop to tax advantages
Transfer pricing may have several objectives; One of them is, without a doubt, to satisfy the collection purposes.
By Steven Barker Francis *
To begin with, we must point out that the issue of transfer pricing is aimed at analyzing the transactions that occur between companies that are considered linked, according to the disposition of each country.
This analysis is carried out by means of a technical study and aims to conclude whether these operations are executed within the market ranges that are constructed and established in the technical study; That is, whether inter-related transactions are carried out as they would have been by independent parties, between third parties without any relation whatsoever. This is what we would call "market values".
Transfer prices may have several objectives in terms of their use. For the purposes of the Tax Administration of each country, one of them is, without a doubt, to satisfy the collection purposes and, for the different taxpayers, carry out the task of complying fiscally with the regulations established by each of our countries, or Well, to take advantage and obtain certain advantages with an adequate fiscal planning.
As for the Tax Administration of our countries in Central America, it is clear that the objective is to prevent companies in the same economic group from obtaining tax advantages in transactions between them and, therefore, that the income tax Is diminished by the application of these transactions among related firms.
For example, the collection of royalties or licenses to use the parent company to one of its subsidiaries, or the collection of a corporate service to the subsidiaries.
For the Tax Administration, all transactions between related companies that affect results and, therefore, profits, must be at market values, which must be determined in this way by a technical study of transfer prices.
However, for taxpayers in the first instance, and for some seven or eight years, at least in Central America, technical studies of transfer pricing are an obligation that must be met, so companies prepare them to satisfy a compliance Established in each of their countries.
Moreover, in Costa Rica, Guatemala, Honduras, Panama and the Dominican Republic, the transfer pricing information declaration is already a formal obligation that must be submitted within a period established by each of the administrations of the countries mentioned.
While it is true that companies must fulfill the formal duty of having a study (and, in some countries, an informational statement), in addition, the true value that should be given to the preparation of technical studies of transfer pricing is to guide them To an adequate fiscal planning, where transactions between related firms that, due to the nature of the business, must be carried out considering the price ranges or margins of market profit and, from there, generate operations seeking an adequate Efficiency in the payment of the income tax or some other involved.
It should be clear that the methodology of transfer pricing application opens a window to establish certain strategies of price of goods and especially of services that occur between related companies, which entails ordering them and, as far as possible, More efficient to avoid payments in excess of the income tax.
This year, 2017, will be the beginning to comply with the presentation of the informative declaration of the fiscal periods 2015 and 2016 in Costa Rica, reason why it is required (and must be taken into account) to know the due dates for said Statement, to avoid penalties for failure to file in due time.
* Steven Barker Francis is a partner at TP Consulting Costa Rica
