Application of comparability adjustments (including country risk adjustment) and non binding criteria to transfer pricing matters.
Forum open to the public 9
The following 15 January the main auditorium of the Universidad Panamericana Campus Mixcoac will host the forum “Application of comparability adjustments and non-binding criteria to transfer pricing matters”.
This unprecedented event will allow taxpayers, their advisors, and the tax authorities, represented by the Central Administration on Transfer Pricing and the Central Administration for the development of Transfer Pricing strategies, to express their viewpoints regarding very important issues affecting the taxation of multinational groups in Mexico. The proposal by the Servicio de Administracion Tributaria (SAT) should be observed with particular emphasis relating to the application of transfer pricing comparability adjustments, especially country risk adjustments: https://www.gob.mx/sat/acciones-y-programas/preguntas-frecuentes-en-materia-de-precios-de-transferencia-con-respecto-a-ajustes-de-comparabilidad?tab=- One should remember that for effects of this tax regime, taxpayers must demonstrate that their intercompany operations were agreed upon as would have been among or by independent third parties in comparable operations.
From the viewpoint of the Mexican tax authorities, the use of foreign “comparable” companies to evaluate the reasonability of an intercompany transaction in which the Mexican taxpayer participates, employing transfer pricing methods that assess profitability of a transaction at different levels, should consider the use of a “country risk” adjustment, where sales of comparable companies from a developed country (for example the US) would have to increase considering the performance that, hypothetically, would have occurred had the operation have had taken place in Mexico (acknowledging a variance in risk from the market of the comparable to that of an emerging market, in this case Mexico, and considering the economic premise of greater risk greater reward).
The proposal for the country risk adjustment, by the effect it could have on the ranges used as reference to validate the arm’s length condition [market value] of the analyzed operations [by consistently increasing the reference range and potentially leave the taxpayer in a noncompliant position], has generated a great deal of controversy by taxpayers and their advisors. Due to the seriousness of this issue, the Transfer Pricing Commission of the National Federation of Economists has convened a public forum where the implication of this issue will be analyzed by distinguished professionals in the field coming from important firms in the country as well as by the Mexican fiscal authorities. This forum, given the importance for the taxation of corporations in Mexico, will be open to any party with interest in providing technical considerations for their discussion and evaluation. These may be organizations, corporations, or firms that have not yet participated in the Transfer Pricing Commission of the National Federation of Economists. This event will analyze the framework for comparability, technical aspects of the country risk adjustment from an economic perspective, the relevant points of the SAT Mexico proposal, as well as potential alternatives for this adjustment.
The forum will also include a technical session where non-binding criteria to 39/ISR/NV “Recognition of Unique and Valuable Transactions” and 40/ISR/NV “Changes to the value of operations with related parties within the interquartile range”. This session will analyze, with great care, how contributions of Mexican taxpayers to multinational groups are considered, as well as the SAT proposal to disavow adjustments to price or profit margins that are carried out by taxpayers even within the interquartile range.
Do not miss out on this important event! Registration can be found in the link below: http://qcgpreciosdetransferencia.com/eventos/
