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Increased Transfer Pricing Interest In Argentina

By Carlos Casanovas and Milton Gonzalez Malla
Posted: 4th April 2012 12:36

Governments are increasingly focused on raising revenues through taxation.   As a result, more jurisdictions are ramping up their enforcement efforts — not only in developed nations but also in many emerging markets.   For instance, tax collection in Argentina has risen steadily during late years.  In fiscal year 2010 government's revenues (in Argentine pesos) increased 34% on year on year basis.  During 2011 tax collection will show a similar pattern, probably reaching by the end of the year a historical record of almost 40% when measured as percentage of gross domestic product.  

The government revenue includes taxes, social contributions, grants receivable, and other revenue.  An improved macroeconomic environment and a firm approach towards tax collection are behind this trend.  In Argentina government income has been boosted by social security revenues, a special levy on banks accounts debits and credits, taxes on certain exports and general income tax collection. Specifically on the income tax side, besides lack of adjustment for inflation for income tax purposes, increased scrutiny of cross border transactions has been a driver behind the surging tax collection.

Among the main tax issues we have seen in Argentina during these years it should be mentioned:

  • Increased audit activity of cross border transactions (i.e.: intercompany services, debt vs equity, interest deductions, transfer pricing challenges, intermediary companies, etc.);
  • Augmented focus on Tax Information Exchange Agreements with other countries; and
  • Disincentives towards transactions with low tax jurisdictions.

In practice tax authorities are increasingly sophisticated in the way they operate, they have recruited and trained more people, and they are focusing more closely on business, supply chain and transfer pricing activities.  In this sense, it should be noticed that all the items above concern to cross border matters, and most of them relate to some way to transfer pricing.

Argentine Transfer Pricing rules (TP rules) were introduced in 1999 and they entail extensive contemporaneous documentation.  Taxpayers are required to keep and eventually submit all the documents evidencing that prices, amounts received and profit margins have been established on an arm’s length basis.  Furthermore, taxpayers are required to keep an annual transfer pricing study for cross border transactions with related parties, deemed related parties and independent parties located at tax havens.

When tax authorities focus more closely on transfer pricing activities, controversy takes place. Provided that TP rules have been in force in Argentina for more than a decade, the experience regarding TP rulings is fairly modest but steadily growing. Since the enforcement of the local TP rules there have been at least eleven specific rulings.

First contemporaneous TP ruling is the decision adopted in case Compañia Procesadora de Carnes (2004) and it is related to a formal issue.  The taxpayer had voluntarily accepted a transfer pricing adjustment, but objected the high penalties pretended by tax authorities due to tax omission.  The Judges accepted the taxpayer's standpoint about transfer pricing being a “new and complex issue”, and relieved taxpayer of formal sanctions due to an “excusable error” in their transfer pricing.  Ruling on the case Surmar argues about the same formal topic.

The other TP rulings discuss differences in tax base and are mainly focused in the Automotive and Pharmaceutical industries.  Most of these court decisions refer to fiscal years previous to current TP rules, being only decision adopted in case Aventis Pharma S.A. (2010) and decision adopted in case Nobleza Picardo (2010) under the present set of TP rules.

A trend that can be noticed is the understanding of the Judges, explicitly expressed in their rulings, of the transfer pricing matters as a subject characterized by its novelty and complexity.  In this regard Judges have been prone to take the discussion to areas more known to them, instead of involving in deep technical analysis of the transfer prices under scrutiny.

Finally, it should be noticed that this jurisprudence includes references to OECD(1). Transfer Pricing Guidelines(2). Although Argentina is not an active OECD member and the OECD Transfer Pricing Guidelines are not referenced in Argentina’s Tax Law and Regulations, the tax authority usually recognizes the OECD Transfer Pricing Guidelines as long as they do not contradict the Income Tax Law and Regulations.  In this regards, the Judges have done explicit references to OECD Transfer Pricing Guidelines in some of these rulings, like for example did the decision on the case Compañia Ericsson (2007).

To sum up, in Argentina there is an increased interest regarding tax matters, especially concerning cross border transactions and transfer pricing issues.  In particular, intense TP scrutiny from tax authorities has been the norm during late years.  While court cases have not settled yet a deep technical analysis of the transfer prices under scrutiny, some of them have made explicit reference to reasonable OECD Transfer Pricing Guidelines provisions.  Further developments should be expected in the near future.


Carlos is a Tax Partner in charge of the International Tax Services and Transfer Pricing division of Ernst & Young Argentina.

He renders tax advisory services to multinational companies carrying out business activities in Argentina. He has more than sixteen-years’ experience in tax issues and specializes in tax planning for businesses in Argentina and abroad, international taxes and transfer pricing.

Carlos is a Certified Public Accountant graduated at Universidad Católica Argentina. He has participated in seminars and conferences held in different countries and he usually lectures in numerous international seminars on tax issues and investments abroad. He has published various articles related to tax matters. He is a professor at the Post Graduate School of Universidad de Buenos Aires and Universidad de San Andres.

Carlos is a member of the AAEF (Argentine Association of Tax Studies) and IFA (International Fiscal Association).

Carlos can be contacted on +54 114318 1619 or by email at 

Milton is a Senior Manager in the Transfer Pricing division of Ernst & Young Argentina.

Since he joined Ernst & Young, his function has been advising multinational Companies with business in Latin America about transfer pricing issues, with special focus in Argentina, Chile, Colombia, Mexico, Peru and Uruguay.

Milton obtained a B.A. in Economics at the Universidad Nacional del Sur (Bahia Blanca, Argentina) and completed a Master of Science in Economics and Finance at Universitat Pompeu Fabra (Barcelona, Spain). He has participated in seminars and conferences about economics and taxes.  He has taught Economics to undergraduate students in Argentina and Spain. He has written articles for economic journals and tax publications. He regularly lectures in numerous seminars on economics and tax issues.

Milton is a member of ADE (Argentine Association of Enterprise Executives).

Milton can be contacted on +54 11 4318 1757 or by email at

(1)Organisation for Economic Co-operation and Development (OECD).

(2) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration (OECD).


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