1. GIZ-CIAT Seminar JUNE 2014 Taxation of Large enterprises
Transfer Pricing
Specific methods for the control of transfer prices:
“Sixth Method”
Port of Spain, Trinidad and Tobago
June, 2014

2. Final recipient Local Exporter International intermediaries Tax havens
TRIANGULATION
Final recipient
Local Exporter
DESTINATION
MERCHANDISE
INVOICING
INTERMEDIARY
INVOICING
International intermediaries Tax havens
TAX HAVENS OR COUNTRIES WITHOUT EXCHANGE OF INFORMATION
FUNDS FROM JURISDICTIONS WITH FLEXIBLE EXCHANGE RATE
Tax Risk
Hollowing the national tax base(Under-invoicing)
Difficult to be used in countries without information exchange
GIZ-CIAT Seminar – JUNE 2014

3. CHARACTERISTIC OF THE TRADER CHARACTERISTICS OF OPERATIONS
TRIANGULATION
CHARACTERISTIC OF THE TRADER
CHARACTERISTICS OF OPERATIONS
Without economic substance
Located in tax havens or territories with tax opacity
Do not add value to the operation
Price agreed months before shipment
Agreed Price < Market price at the date of shipment
Payments from countries with “flexible exchange rate”.
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4. Records on crops yields In some cases, tax losses
ECONOMIC CONTEXT
INTERNATIONAL MARKET
RESULTS OF EXPORTERS
High price of Commodities.
Records on crops yields
Profits below average
In some cases, tax losses
GIZ-CIAT Seminar – JUNE 2014

5. Knowing the international market
STRATEGY OF CONTROL "SIXTH METHOD"
INVESTIGATION
Operation of companies
Knowing the international market
Survey of Information in the argentine company and its associates abroad
Compared to international prices of commodities
APPLYING
“SIXTH METHOD”
GIZ-CIAT Seminar – JUNE 2014

6. CONDITIONS FOR ITS IMPLEMENTATION THE PRICE SHOULD BE ADJUSTED TO:
“SIXTH METHOD”
CONDITIONS FOR ITS IMPLEMENTATION
THE PRICE SHOULD BE ADJUSTED TO:
Export of commodities
Export triangulated - intervention of international intermediary
The broker does not meet requirements of "economic substance”
Real presence in the country, and assets functions and risks in accordance with negotiated volume.
Its main activity is neither the securing of passive revenues, nor the intermediation with or to Argentina
Brokerage operations with other members of the group should not be more than 30%
The quote value to date of completion of the loading.
If the agreed price is higher, it is not adjusted
Excluding Method
GIZ-CIAT Seminar – JUNE 2014

7. Information is necessary to carry out the controls:
"SIXTH METHOD“ CONTROL STRATEGY
Information is necessary to carry out the controls:
Developmento of proper databases
Information from the taxpayer, third parties and information from other organizations (ex. BCRA, Customs)
Development of contracted databases
Development of the Information exchange (tax and customs)
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8. Applying international information exchange
"SIXTH METHOD“ CONTROL STRATEGY
Applying international information exchange
Request to the destination country
Confirm final value, invoicing chain and payment circuit (“beneficial owner”).
Request to the invoicing country
Verify economic substance and invoicing chain
Synergies of cooperation within the tax and customs scope
Wide network countries with existing bilateral and multilateral instruments:
- Customs cooperation: 70
- Tax cooperation: 61
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9. Economic substance of traders
STRATEGY OF CONTROL "SIXTH METHOD"
Examples of the results obtained through the exchange of international information:
Economic substance of traders
We've had cases where jurisdictions reported that the alleged traders did not legally existed.
Invoicing chain and the product final value
Countries that contributed with data and documentation that allowed closing the invoicing chain and test the real value of the goods at destination which sheds important differences with the value declared in Argentina.
Information requests received from other countries
As a result of requests made to destination countries, this made those countries interested in the import value.
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10. RESULTS
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11. RESULTS
- In self declared adjustments the highest impact is obtained during the year of implementation ( ) when traders could not be justified.
- Next ,sector operations were restructured , and matrix companies or related companies located in non-transparent tax countries were designed as TRADERS.
-During the last years, the national-level triangulation has been diminishing. This behavior is not observed in the agro exporting sector, which keep triangulating 98% of exportations
- Countries with highest triangulation keep being the ones were the agro-exporting sector TRADERS are located.
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12. RESULTS 2009 2010 2011 2012 % Triangulation 49% 44% 38% 32%
% Triangulation 49% % % %
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13. MAIN COUNTRIES – TRADERS LOCATION
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14. Fights evasion in strategic sectors of the Argentine economy
CONCLUSION
SIXTH METHOD
Fights evasion in strategic sectors of the Argentine economy
Prevents the relocation of benefits caused by the harmful tax planning
Discourages harmful triangulation and allows the detection of intermediaries without "economic substance"
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15. Thank you very much
Ezequiel Moreno