Transfer Pricing in Venezuela under the new approach BEPS

Luis E. Benitez VEGAS Already after two years of discussions on the various actions designed by the Organization for Economic Cooperation and Development (hereinafter OECD) to address the problem of the erosion of the tax base and the transfer Benefits under the BEPS project (for its acronym in English Base Erosion and ProfitShifting) finally last October 5 this organization issued a final report regarding the 15 actions to be taken to address this issue, which covers a gap approximately about $ 240 billion in tax evasion worldwide, representing Latin America only about $ 72 billion, ie 30% of total global accounting tax evasion.

Among the most controversial actions and that had the greatest impact within the discussion was regarding changes related to documentation of transfer pricing, which is contained in the action plan number 13. This action contemplated Very briefly, three different ways of documenting the operations of multinational companies have with their related parties. First, we have a master report (master file), which provides tax administrations high-level documentation regarding the overall operations of a multinational group and its policies on transfer pricing. Secondly, we have a local report (local file), which consists of providing material information rationed transactions between parties, amounts and the proper analysis of transfer prices for such transactions and, finally, not least important, is the so-called country by country report (country-by-country report), the most controversial being brought to be the most innovative and create great uncertainty among taxpayers.

Under these new requirements regarding the documentation of transfer pricing, country by country report seeks to provide information and annual aggregate in each jurisdiction where a multinational group operates about their earnings and profit attribution both transactions with related parties as with third independent, tax paid in each jurisdiction as well as information related to the most important business activities developed by the group. However, for this report exception referred to in your compliance for those multinational groups, whose profits consolidated year do not exceed EUR 750 million (about $ 805 million dollars or the equivalent in local currency), representing an exclusion of 85% 90% of multinational groups to fulfill this report and focusing on a group of companies which in turn account for 90% of corporate profits worldwide.

But how they could enter into force in Venezuela these changes in transfer pricing documentation. One possibility could be based on an amendment to Chapter III of the Law on Income Tax (LISLR), which I think is not within the legislative agenda for the times. Secondly, the tax administration through legal standards sub range, could issue some guidelines regarding the additional documentation should provide taxpayers based on the action plan 13, to comply with the principle of effective independence or Arm’sLength . And thirdly, it is important to remember the provisions of the LISLR Article 115 thereof, which stipulates the use of the guidelines on transfer pricing 1995 OECD guidelines or those that replace them, provided they are consistent with the provisions of the LISLR and treaties signed by the Republic.

Based on this last premise, which I consider truly going to materialize the entry force of implementing action plan 13. Recall that within the project objectives of BEPS is to modify 2016 the OECD Guidelines on transfer pricing, in particular Chapter V on Documentation, where they will incorporate the guidelines adopted in the plan of action 13. Therefore, it is in this way that the administration can apply everything on the form that taxpayers must document their transactions with relate parties to comply with transfer pricing regime on the one hand and on the other Venezuelan taxpayers not only comply with these new provisions locally, but also meet the requirements addressed to them his headquarters in each of their jurisdictions.

Finally, I would not conclude this article without leaving a reflection; Currently, issues of further discussion at international level of taxation are completely focused on the draft of the BEPS and therefore, Venezuela should not be stingy in this discussion, because historically our country has one of the procedures of transfer pricing more oldest in the region, we have been pioneers in its implementation in other countries in Latin America and therefore we encourage discussion locally not only the action plan 13 but the rest of the shares in some other way will have a fundamental impact both for taxpayers and tax administrations.