Argentina Implements Country-by-Country Reporting

Background

During the discussions over the Base Erosion and Profit Shifting project, the members of the Organization for Economic Cooperation and Development (“OECD”) and the G-20 nations agreed on the following: “Develop rules regarding transfer pricing documentation to enhance transparency, for tax administrations, taking into consideration the compliance costs for business. The rules to be developed will include a requirement that MNE´s provide all relevant governments with needed information on their global allocation of the income, economic activity and taxes paid among countries according to a common template” (Summary of action number 13 of BEPS). In this context, it was determined that multinational entities would need to provide three levels of transfer pricing information: a local file, a master file and a country-by-country report.

On June 30, 2016, Argentina signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports which establishes a roadmap to automatically exchange country-by-country reports between nations. Until recently, while taxpayers operating with related parties and with parties located in non-cooperative jurisdictions were required to file a local transfer pricing report under General Resolution 1122, the AFIP had not implemented country-by-country reporting.

Taxpayers subject to country-by-country reporting

A pre-requisite for country-by-country reporting to apply is that the taxpayer is a member of a multinational enterprise (“MNE”). Being a member of an MNE Group requires the following: (i) two or more entities with tax domiciles in different jurisdictions; or (ii) one entity subject to tax in different jurisdictions as a consequence of the activities of its permanent establishments located in different jurisdictions.

Certain MNE Groups are excluded from country-by-country reporting for not exceeding the threshold of total consolidated annual revenue of €750.000.000 (seven hundred and fifty million Euros). This parameter is determined for the year subject to reporting by looking at the consolidated revenue of the prior year.

Reporting entity

Action 13 of BEPS did not intend to multiply the reporting burden of a MNE Group. Therefore, even if an entity resident in Argentina belongs to an MNE Group, such entity will only be the reporting entity in Argentina if: (i) it is the ultimate parent entity of the MNE Group; (ii) it has been designated as the reporting entity by the ultimate parent entity; or (iii) if (a) the ultimate parent entity has no obligation to file the country-by-country report in its jurisdiction; or (b) being obligated to file the country-by-country report in its jurisdiction, such jurisdiction has not signed an agreement to exchange country-by-country reports with Argentina; or (c) even if such an agreement has been signed, the other jurisdiction systematically refuses to share information with Argentina.

Content of the country-by-country report

The country-by-country report has to include the following information:
 

Term

The country-by-country report has to be filed annually by the last business day of the twelfth month after the fiscal year end of the ultimate entity of the MNE Group.

Supplementary information regime

General Resolution 4130-E implemented a supplementary information regime applicable to the local entity of an MNE Group regardless of whether such MNE Group if subject to country-by-country reporting, i.e. regardless of whether the €750.000.000 threshold is exceeded. The following information must be provided annually to the AFIP:

Failure to comply and sanctions

Failure to comply with the new information regimes can result in the impositions of fines established in Section 38 and Section incorporated after Section 38 of Law 11,683. Furthermore, the AFIP could: (i) increase the audit risk level of the taxpayer; (ii) suspend or exclude the taxpayer from any Special Tax Regime; or (iii) suspend the issuance of Exclusion Certificates or Non-Withholding Certificates for the taxpayer.