According to information from the Organization for Economic Cooperation and Development (OECD) information exchange portal updated to June 2017, Argentina, Brazil, Chile, Colombia, Mexico and Uruguay are among the Latin American countries that have begun to Implement the Country-by-Country Report, as well as the Master File and Local File for the transfer pricing documentation. These countries have developed their regulations on this subject based on the final report on transfer pricing and country-by-country reporting (Action 13 BEPS) which updated the Chapter V Documentation of the OECD Guidelines on Transfer Pricing to multinational corporations and tax administrations (OECD Guidelines). In addition, the United Nations Practical Manual on Transfer Pricing for Developing Countries (UN Handbook) in Section C.2 of Part C addresses this issue.

Although there are differences between tax systems and economies in developing countries that may involve different documentation requirements to protect their tax bases, the countries mentioned have been developing their regulatory framework, in general closely aligned to the OECD Guidelines. However, there are certain particularities that the countries mentioned above have incorporated, among which we can mention:

Sworn statement: In the case of Mexico, Brazil and Chile, both Master File and Local File have been defined in their legislation as sworn statements, from which it may be inferred that they wish to emphasize the presumption of veracity of the information provided, Giving greater responsibility to the taxpayer on the content of these documents, in the event that false or misleading information is provided, regardless of the lengthy and detailed information or technical nature of these reports or that the taxpayer relies on external expert advisors on these issues for their preparation. Depending on the legislation of each country this situation could lead to administrative and even criminal penalties, depending on the severity of the fault.

Legal instrument chosen for implementation: In the case of Mexico, these obligations have been included in a reform of the Income Tax Act of 2016. Uruguay has made the legal adjustments necessary to include these obligations in Chapter VII Transfer Pricing of Title II Tax on Income from Economic Activities (IRAE) of the Ordained Text, while other countries have implemented them through resolution and normative instructions such as Chile and Brazil respectively. For its part, Colombia has included these obligations in its Tax Statute.

Materiality: In principle, the OECD Guidelines stipulate in paragraph 5.32 that individual countries should establish their own standards of materiality. However, paragraph 5.52 recommends that in the case of the Country-by-Country Report there should be an exemption for business groups with annual consolidated revenues in the previous fiscal year less than 750 million Euros. A level of materiality of this nature would have a different impact in developing countries with relatively small economies than it would have in larger economies. This would translate into a reduced number of taxpayers reached by the obligation to prepare the Country-by-country Report, as well as the definition of a role for these jurisdictions, mainly information recipients.

However, it appears that some countries have made an assessment of this situation. While some countries have not issued regulations that establish some level of materiality, countries such as Colombia have established in their Tax Statute that taxpayers who enter into transactions with related parties whose net equity at the end of the previous fiscal year is equal to or greater than 100 thousand units of UVT tax value (equivalent to approximately US $ 1 million) or gross income over 61 thousand UVT (equivalent to approximately US $ 650 thousand) must prepare their supporting documentation including the Master File and Local File. In the case of the Country-by-Country Report, the taxpayer must have consolidated revenues for accounting purposes equivalent to or above 81 thousand UVT (equivalent to approximately US $ 850 thousand). For its part, Uruguay has established the obligation to prepare the local file for those taxpayers who enter into transactions with related parties for more than 10 million indexed units (equivalent to approximately five million US dollars). In the case of Brazil, taxpayers whose parent entity is a resident and has a consolidated income of more than two thousand two hundred and sixty million reais (equivalent to approximately US $ 720 million).

Submission date: In the case of Mexico, the filing of the Master File, Local File and Country-by-Country Report is no later than December 31 of the year immediately following the fiscal year in question. Chile, for its part, established a deadline for the submission of the country-by-country report on the last business day of June of the year following the close of the immediately preceding fiscal year.

Other aspects: Within its legislation, Mexico has included the option that in those cases in which the tax authorities cannot obtain the information corresponding to the country-by-country report through the information exchange mechanisms established in the international treaties in force, taxpayers will have a maximum period of 120 business days from the date on which the request is notified to provide the report. For its part, Brazil provides that the taxpayer submits the Country-by-Country Report when its parent entity is located in a jurisdiction in which this obligation is in force or does not have an agreement of competent authorities with the country in the period of compliance with the obligation. In addition, it contemplates that the taxpayer present the information in the event of failure in the information systems in the jurisdiction of the controlling entity.

Despite the aforementioned aspects that point to a certain level of adaptation to local circumstances, the regulations of these countries seem to be fairly aligned with what is established in both the OECD Guidelines and the United Nations Handbook. One only has to wait if the next countries to adopt these norms will do it with the same level of consistency or mark a little more distance in search of a better adaptation to the realities of their jurisdictions.

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