Although the great majority of the Latin American countries had adopted obligations of transfer pricing documentation, it is during the present decade that Central American countries and part of the Caribbean have included the obligations of transfer pricing documentation in their regulations. Particularly, in Dominican Republic, through the General Rule 04-2011, specific rules are established for taxpayers to demonstrate compliance with the Arm’s Length Principle, including documentation obligations.  In this sense, article 9 of this rule established that taxpayers must develop, when applicable, a report (or study) on the valuation process of the transfer prices agreed with their related companies. These obligations of documentation were subsequently included in the transfer pricing regulation.

In 2010 in Panama, through Law 33, later modified by Law 52, the obligations of transfer pricing documentation were added and the tax code was modified.  In this sense, the article 762-J establishes that taxpayers that have to submit the transfer pricing information return , at the time of the presentation, must have a transfer pricing study, which contains the information and the analysis that value and document their operations with related parties. Later, the transfer pricing was regulated through Executive Decree 958 of 2013, modified by the Executive Decree 390 of 2016 that establishes in details the information that the study of transfer pricing must contain.

In the case of El Salvador, the obligation of compliance with the Arm’s Length Principle is established in the tax code. However, the General Directorate of Internal Taxes emitted in 2012 a guide (General Guidelines to facilitate the Tax Treatment of the Operations with taxpayers domiciled, constituted or located in Countries, States or Territories with preferential Tax Regimes, of Low or Non-Taxation or Tax Havens.  In this sense, point 7.2 of these instructions referring to the conservation of documentation, information and proof mention that article 147  of the tax code establishes an obligation of documentation for the taxpayers who operate with related parties or yaxpayers domiciled, constituted or located in countries, states or territories with preferential tax regimes, low or non-taxation or tax havens. They have to keep in good order for a period of ten (10) years counted from the issuance or receipt, the documentation, information and proofs that endorse and demonstrate that the taxpayer has used the market prices of the operations and amount of the compensations used in transfers of goods or services between independent parties.  In addition, these guides mention that this documentation will be elaborated considering the complexity and volume of the operations. It must include all documents that the taxpayer has used to determine the value of the operations with related parties or taxpayers domiciled, constituted or located in countries, states or territories with preferred tax regimes, of low or non-taxation or tax havens.

Guatemala, through Decree Number 10-2012 of 2012, has published a law of tax update that establishes the Arm’s Length Principle and other aspects of the regime of transfer pricing. In  its section II on information and documentation, it mentions that the taxpayers must have, at the time of presenting the income tax (Impuesto Sobre La Renta o ISR) return, sufficient information and analysis to demonstrate and to justify the correct determination of the prices, the amounts of compensations or the profit margins in their operations with related parties. These rules were temporarily suspended until the year 2015 through Decree Number 19-2013.  On the other hand, article 65, section III of the regulation of the law of tax update denominated “Information Requirements and other formal obligations” details the taxpayers’ report denominated “Transfer Pricing study”.  This report must include sufficient information and analysis to demonstrate and justify the correct determination of the prices, the amounts of the compensations or the profit margins in operations with related parties.

In Costa Rica, in order to extend the regulatory framework of transfer pricing and the compliance with the Arm’s Length Principle defined in the Interpretative Guideline 20-03, Dispositions on Transfer Pricing are issued in 2013 through decree number 37989-H.  Article 9 of these dispositions denominated “General Documentation Guidelines” establishes that the taxpayers must have the information, documents and the analysis sufficient to value their operations with related parties, according to what the Tax Administration orders by means of general resolution. The documentation elaborated or used in this process must be made available to the Tax Administration, with the purpose of verifying compliance with the Arm’s Length Principle. The documentation requirements of the Administration will take shape applying the prudent business management principles, considering that the documentation obligations would not imply costs or burdens out of proportion to the own circumstances of the taxpayers. Similarly, it mentions that this documentation will have to be properly translated to the Spanish language, if applicable.

On the other hand, Honduras established its obligations through the Law of Regulation of Transfer Pricing by means of Decree Number 232-2011 that entered into force in 2014. This law, in its Article 17 denominated “Documentation and Information” states that taxpayers will have to present the information and analysis sufficient to value their operations with related parties.  In addition, it mentions that this obligation may also include any other information that would be required. Title VIII “Of the Documentation and Information” of the Transfer Pricing Regulation contained in the Agreement Number 027-2015 specifies theses obligations. The taxpayer must have sufficient information and analysis to verify that the conditions of their operations with related parties or with those in special regimes that enjoy tax benefits comply with the dispositions of the Law of Regulation of Transfer Pricing and its regulation. The taxpayer must include, without prejudice of other antecedents that can be required in the appropriate control instance, a transfer pricing study that gives account of the determination of the prices, values or profits of its operations with related parties or with those in special regimes that enjoy tax benefits. The application of the methods or the presentation of the studies is the totality of the relevant antecedents where these methods have been applied or these studies have been elaborated.

In Nicaragua, chapter V “Transfer pricing” of Title I “Income Tax” of the Law Number 822 of Tax Concertation of 2012 established the regime of transfer pricing, whose entry into force was deferred to 2017. In this sense, Article 104 of this law establishes that the taxpayers must have, at the time of submitting their income tax return, the sufficient information and analysis to value their operations with related parties.  In addition, it mentions that the information or documentation will have to be elaborated considering the complexity and volume of the operations and to include the information that the taxpayer has used to determine the valuation of the operations between related entities.

Although these jurisdictions have been the last ones in Latin America in adopting obligations of transfer pricing documentation, they have focused on leveraging from the experince of other jurisdictions and in some cases, they have not delayed in catching up. We may expect that they will fully assume their role by entering in the new era of the transfer pricing documentation based on the BEPS (Base Erosion and Profit Shifting) Action Plan.

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