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The Transfer Pricing regime has taken special relevance in Latin America as it is present in most laws. In response to this, the Inter-American Center of Tax Administrations (ICTA)[1] has published a tool that compares the different aspects of this regime and this article seeks to disseminate conclusions obtained from this information.

Both individual companies and those that are part of a national or multinational group, develop their economic activities within a territory, which comply with the tax regulations established by each country through its Tax Administrations.

In the case of transactions with related parties, the analysis carried out by the Tax Administration and determine if these affected the determination of income is called Transfer Price Analysis and depending on each Tax Administration in compliance with this regime, a report of according to dates, amounts and deadlines.

At the Latin American level, the study presented is known as the Local Report, in the case of Ecuador it is the Integral Transfer Pricing Report.

1. Definición

Transfer Pricing is a matter that determines whether the principle of full competition in the operations carried out by related companies is fulfilled, within a certain period.

In other words, it is evaluated if the operations were carried out at market value, considering prices, dates, characteristics and conditions of each operation. Depending on each tax administration, an evaluation can be carried out at the individual or global level, that is, by line of operation or operational profit.

For this it is necessary to demonstrate that the operations carried out with related parties were carried out under the same conditions that would have been carried out with independent parties.

All this with the objective of demonstrating that the prices agreed between related parties were not determined to manipulate the fiscal result and that it could have affected the interests of the treasury.

2. General aspects of the Transfer Pricing regime in Latin America

According to the IATTC database, the classification by type of standard adopted by Latin American countries for transfer pricing control is as follows:



# of countries


They do not have transfer pricing norms or are in the process of introducing them.



They do not have transfer pricing rules, but they have rules that could be applicable to particular cases. For example, general anti-abuse rules.



They have general transfer pricing rules, those that partially or totally follow the OECD guidelines[2].



They have specific rules for transfer pricing, those designed for a particular type of subject or operation, such as methodologies for export or import of commodities.



They have general and specific rules for transfer pricing.




In the case of formal obligations regarding the issue of transfer pricing, the following information is presented:



# of countries


Obligation to present Transfer Pricing Report.



Obligation to keep Transfer Pricing Report.



Obligation to submit a Transfer Pricing statement.



With regard to the classification of transactions between related parties that must be included in the informative declaration of transfer pricing we have the following:



# of countries


Entry and Exit Operations.



Assets and Liabilities Operations.



Other operations.



In the group referred to as other operations, they may include the following:

·         Financial operations and reimbursable expenses.

·       Transactions with tax havens, cost-sharing agreements and corporate restructuring, contributions in kind or in industry to foreign companies or entities, intangible contributions to foreign companies or entities, additional information on operations not reflected in the income statement.

·         Exit for royalties, technical, administrative and consulting services.

·         Cumulative income and authorized deductions.

·         Income and expenses for royalties, Know How, interest paid and received, insurance premium and reinsurance payment.


The methods for the analysis of operations with related parties according to the norm of each country are the following:


# of countries

Comparable Un-controlled Price / CUP.


Resale Price / RPM


Additional Cost / CPM


Utility Distribution / PSM


Net Transaction Margin / TNMM


Residual Distribution of Utilities / MPSM


Methods for export and / or import of commodities


Methods determined by the taxpayer



Regarding the control processes, from 2009 to 2015, there are a total of 2,329 cases of control in the matter of transfer prices, carried out in 13 Latin American countries, within which the Treasury has managed to determine adjustments for transfer prices considering the following criteria in the evaluation of reports:

·         Evaluation and trends of taxpayer tax behavior.

·         Securities declared in transactions with related parties.

·         Operaciones con paraísos fiscales.

·         Review of returns lower than the general ones of the sector.

·         Crossings of financial, tax and customs information.

·         Identification of taxpayers with lower profit margins than the general of their industry.

·         Models designed by the tax administration.

·         Capital structures of taxpayers and others.

As indicated in this article, transfer pricing in Latin America is a topic of high interest for tax administrations, in order to verify if the profitability paid by the taxpayer is not affected by tax manipulations or evasions.

For this reason, as time elapses, tax administrations work on information exchange agreements for the verification and analysis of operations carried out between related parties. The simple omission or breach of formal obligations with the Treasury implies that the tax administration places more emphasis on the verification and supervision of the development of the activities carried out by the taxpayer, and this could expose the rest of the companies that make up the group if was the case.

The subject of Transfer Pricing is a subject that can become complex for the taxpayer, that is why specialists who know the subject in detail and deeply to be able to provide advice and report preparation should be used. From the identification of all the operations to be carried out, until the election of the best method for the analysis of said operations.


Raymond Tayupanta

TP Consulting Ecuador Analyst


«Database on transfer pricing rules and practices in Latin American and Caribbean countries ». CIAT, May 8, 2018.

[1] CIAT: Inter-American Center of Tax Administrations, It is an international organization, nonprofit that provides specialized technical assistance for the updating and modernization of tax administrations. With the firm commitment to achieve quantifiable results and aimed at improving international tax systems.

[2] OECD: Organization for Economic Cooperation and Development is an international cooperation agency, composed of 37 states, whose objective is to coordinate their economic and social policies.

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