CIAT Readies Transfer Pricing Consensus Directive

CIAT will be promulgating its comprehensive detailed transfer pricing directive by mid-July 2019. A broad consensus within the CIAT tax community established a comprehensive three-year 142-page transfer pricing directive. This document at present will be available only in Spanish.

The consensus directive is termed the “Coctel de medidas para el control de la manipulation abusiba de precios de transferencia, con enfoque en el contexto de paises de bajos ingresesos y en vias de desarrollo.” In other words, the consensus directive is a cocktail of measures for the control of abusive transfer pricing manipulations, with focus on the context of low-income countries and on countries in the path of development.

CIAT, the Centro Interameriano de Administraciones Tributarias, is an affiliated group comprising 42 country members. These CIAT countries are in the process of enhancing their transfer pricing audit techniques and strategies. All 42 CIAT members are UN members. In addition, some CIAT countries are OECD members and are also G20 members.

CIAT began 52 years ago to focus on transfer pricing and other in Central America. The CIAT group has expanded from Central America to include all Latin American countries and virtually countries in the Americas comprising 99 percent of America’s landmass. CIAT’s reach extends to Europe, Africa, and Asia.

CIAT’s coctel examines a new best method selection process and government methods for dispensing with inferior selection alternatives. CIAT ascertains size criteria that shift incomes to tax havens and governmental alternatives. In addition, CIAT examines “geographic” adjustments and parameters.

The primary financial sponsor for CIAT’s transfer pricing consensus directive is GIZ, the Deutsche Gesellschaft fur Internationale Zusammenarbeit, GmbH. This entity is the German Cooperation for International Cooperation, headquartered in Bonn and in Eschborn. Germany’s Federal Ministry for Economic and Development initiated GIZ in 2011.

How CIAT Develops its Consensus Directive

The Consensus Directive involves many transfer pricing facets. The chronology includes the following:

  1. CIAT, in coordination with its member countries, had been seeking to upgrade its transfer pricing audit techniques.
  2. CIAT’s transfer pricing officials developed preliminary transfer pricing audit concepts in 2016.
  3. CIAT ultimately selected 17 well-accomplished transfer pricing experts in 2017 to guide CIAT in developing and enhancing its transfer pricing audit techniques. CIAT selected Margaret Kent and Robert Feinschreiber as their United States representatives.
  4. CIAT’S transfer pricing expert group provided analysis to CIAT as to specific transfer pricing objectives. The expert group then provide “free range” suggestions to CIAT for the consensus directive.
  5. CIAT reviewed this expert analysis to develop transfer pricing directives.
  6. CIAT countries met together to discuss transfer pricing directive options in Antigua, Guatemala in 2018. The purpose was to provide a consensus directive.
  7. CIAT developed an almost-final consensus directive in June 2019
  8. CIAT will promulgate the final consensus directive in July 2019

What is to Come After CIAT’s Coctel

  1. Many CIAT countries will view the consensus directive as a legislative suggestion.
  2. The presence of the CIAT consensus directive will cause some tax administrations to move against an enterprise without needing statutory developments in that country.
  3. We anticipate that knowledgeable transfer pricing professionals will begin advising enterprises as to prepared themselves against tax penalties.
  4. The conference directive will make transfer pricing tax planning more important

 

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