The current process for reorganizing the international tax system has been focused on avoiding the erosion of the taxpayers’ tax base, thereby originating the ambitious action plan derived from the document issued by the Organization for Economic Cooperation and Development (OECD) entitled: Addressing BEPS (Base Erosion and Profit Shifting).  The Action Plan consists of fifteen (15) initiatives for combatting the tax base erosion. In late 2015, the OECD achieved a significant level of progress on issuing a final set of reports for a coherent and coordinated reform, which has become a milestone in the transformation of the international taxation system.

On its part, the United Nations, through its Committee of Experts on International Cooperation in Tax Matters, requested a team to provide their opinions on this issue, which also affects the developing countries.  The main interest of this initiative is to ensure consideration of the relevant aspects for the developing countries.  Likewise, the Financing for Development Office of the United Nations Department of Economic and Social Affairs launched a capacity development project focused on the development of specific practical materials for promoting the protection of the tax base in developing countries. This Project served as basis of the book entitled: United Nations Handbook on Selected Issues in Protecting the Tax Base of Developing Countries.  Nevertheless, the transfer pricing related aspects were not included in this publication, but have been covered by the United Nations Practical Manual on Transfer Pricing for Developing Countries, (hereinafter the United Nations Manual), which was prepared by the United Nations and issued in 2013, with an update in early 2017.

The transfer pricing documentation endeavors to achieve greater transparency and understanding of the transactions of taxpayers belonging to multinational economic groups. Thus, the proposal has been to render transparent the group’s complete value chain. It consists of the preparation of a master file, detailed information of the taxpayer’s activity through a local file which seeks to be similar to the transfer pricing study usually being prepared by taxpayers in several jurisdictions and an additional file called country-by-country reporting (CbCr), with quantitative financial, taxation and business information on the taxpayer’s economic group in each of the jurisdictions wherein he carries out operations. The following table summarizes the general aspects that should be included in each of these reports, as provided in the update of the OECD Guidelines on transfer pricing that are applicable to multinational enterprises and tax administrations, based on the 2015 set of BEPS reports and in turn, endorsed by the United Nation Manual:

Source: Adapted from the OECD Guidelines and United Nations Manual (2017)

According to information in the OECD’s automatic exchange of information portal updated through June 2017, several Latin American countries, among them, Argentina, Brazil, Chile, Colombia, Mexico and Uruguay have begun the implementation of these obligations. In each case, the form of adoption and special characteristics of each jurisdiction will be determining success factors of these measures, as well as serve as reference for other Latin American countries. The horizon for the review and adjustment of these obligations by the OECD in 2020 may appear to be far-off. Nevertheless, time will disclose whether the design of these reports and guidelines within this organization, with the participation and consultation of various interest groups in this process, including such multilateral organizations as the United Nations, associations, sectors, taxpayers and governments, will equally benefit taxpayers and Tax Administrations in countries with more advanced economies as well as their peers in developing countries, particularly in Latin America.

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