LATCO insight in light of BEPS and other developments

Argentina: What could happen in the near future with the Sixth Method taking into account the final wording of Action 10 of the OECD BEPS Project?

Bolivia: What are the consequences of the transfer pricing (TP) compliance rules implemented?

Colombia: What would be the next steps from a BEPS perspective of the Colombian government keeping in mind that OECD Guidelines have been taken in this country as an interpretation criteria for TP rules?

Costa Rica: What is the reaction from the DGT (Treasury) in terms of TP audits and BEPS initiatives? What is the news relating to TP compliance?

Dominican Republic: What is the news in terms of advance pricing agreements (APAs) in the hotel industry? What are the next steps from a Directorate General for Internal Taxes perspective?

Ecuador: How could new rules affect TP advisers? Introducing TP reforms to align the country to worldwide rules.

El Salvador: What does the Treasury (Ministerio de Hacienda) focus on in the case of fiscal audits?

Guatemala: What is the news in terms of compliance and SAT audit processes?

Honduras: Where is the Executive Directorate of Revenue (Dirección Ejecutiva de Ingresos) right now?

Nicaragua: Will TP rules finally be enforced by 2016?

Panama: What is the news in terms of audit processes? What could happen in Panama with countries that have discriminatory treatment according to tax court cases?

Peru: What are the expectations about the introduction of the BEPS plan into local rules (intangibles, commodities, low value-added intragroup services and Action 13)?

Uruguay: What is the news in terms of TP audits? Uruguay is the first country in the region that has sent a tax bill covering BEPS actions to the parliament.

Venezuela: What are the three most innovative TP matters in this country and how could BEPS affect TP legislation?

Let's start the tour!

International trade of agricultural commodities has significant and distinctive aspects that distinguish it from the trade of other products, writes Silvana Blanco. Argentina plays an important role in the grains international markets, which makes this a major subject for the domestic economy and public revenue.

The Argentinian revenue authority, Administración Federal de Ingresos Publicos (AFIP) has been a front runner in TP audits. Back in 2003, it introduced a special rule applicable to the export of commodities, known as the "sixth method", which rapidly spread to other emerging markets. As a matter of fact, in other countries within the region, the scope of the rule was broadened to include commodity import transactions and/or foreign trade transactions without the participation of an international intermediary.

The countries that adopted specific rules for commodities international trade referring somehow to the sixth method include Brazil, Bolivia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Paraguay, Peru and Uruguay. In addition, we should note that over the past years other influential countries such as Russia, China, India and South Africa have supported this Argentina rule in international forums.

Action 10 includes, without limitation, a new guideline for transactions involving the purchase or sale of commodities.

Even though the guidelines are not deemed to be binding in Argentina, domestic rules are built on the guidelines referred to above, and have been treated by case-law as an ancillary source for interpretation purposes.

First of all, the comparable uncontrolled price (CUP) method is established to determine the transaction price of commodities, and public quotes are to be used for the purposes of applying it.

As explained above, CUP is considered to be the most appropriate method to determine whether the price of a controlled commodities transaction meets the arm's-length principle. Under this method, the price may be determined based not only on uncontrolled transactions, but also on international or domestic quoted market prices.

Moreover, for a reliable application of the CUP method, the features of both controlled and uncontrolled transactions should be comparable. These include physical and quality features of the commodity, the contract terms and conditions of the transactions such as volumes traded, timing and terms of delivery, transportation, insurance, and foreign currency terms.

In applying CUP, the contributions made in the form of functions performed, assets used or risks assumed for other entities in the value chain should be remunerated based on value generation.

In order to assist tax administrations with reliable evidence during tax audits, inter-company documentation prepared by taxpayers should include their pricing policies for commodities transactions.

Such information is necessary to justify any type of adjustment that may be necessary. Some examples are listed below:

• Pricing formulas used

• Contracts with final consumers (third parties)

• Premiums or discounts applied

• Pricing date

• Supply chain information

Evidently, in using quoted prices – for determining the economic conditions of controlled transactions – the pricing date becomes a relevant factor in the process. Thus, the "pricing date" is defined as the specific time, date or time chosen by the parties to set the price for the commodities purchase-sale transaction.

Where the taxpayer provides reliable evidence that the date agreed upon in the controlled transaction at the time of pricing is consistent with the behaviour of the parties and the customary practices in the industry, the tax administration will assess the transfer prices for such products based on the date established by the parties.

The list below includes detailed guidelines considered to be reliable evidence:

• Proposals and acceptance of terms and conditions

• Contracts or registered contracts

• Other documents including the transactions terms and conditions

Finally, it is provided that if the pricing date agreed upon by the related parties is not consistent with customary practice in the industry, or with that which unrelated parties would establish, the tax administration may set a different date in line with customary practices. In other words, in the absence of reliable evidence on the pricing date between related parties, the tax authorities may set the shipment date as the pricing date.

In summary, the CUP method is established as the most appropriate method to analyse transactions between related parties involving commodities, and to apply the method, the parties may use market quoted prices. In addition, the rule provides for adjustments to be made in order to increase comparability, and the transaction date is mentioned as a relevant factor. In the event it is not possible to provide reliable evidence of the date in which such transactions have been entered into, the tax administration may use the shipment date.

Based on the explanations above, it may be concluded that the only aspect that may be near to the so-called sixth method used in our country is precisely the reference to the shipment date.

As a result, we can conclude that the focus on transactions involving the purchase or sale of commodities has clearly increased at the international level. This has become apparent as the OECD recommended a fair application of the CUP to test the arm's-length condition of the price agreed upon in transactions involving commodities.

The goal is to improve the methodology for scrutinising commodity transactions to make sure that price reflects the value creations.

Notwithstanding the above, it should be noted that the OECD has not validated the sixth method for the purpose of analysing commodity prices. Despite this, the OECD guidelines force the output of this method (shipment date) only in cases when the date of the purchase-sale agreement cannot be accurately established.

Regarding Argentina, the legislation in force provides for the application of this method in case of exports involving commodities structured through a phantom trading company acting as an intermediary, which is not the final recipient of the goods. Assuming a given transaction has the characteristics already described, TP rules set forth as an anti-evasion rule that the valuation for TP purposes will be the shipment date. This legal provision has clearly challenged the grains export sector, which has argued strongly against this rule saying that "arbitrarily applying the shipment date for purposes of applying the CUP method meant a serious distortion to the commodities industry, thus affecting its operation mainly in the futures market". Furthermore, this rule has raised multiple controversies between AFIP and taxpayers that may lead to double taxation issues.

Nevertheless, we should point out that this rule has achieved a primary objective: to prevent triangulations through "phantom intermediaries".

We expect some future regulatory changes that may update local legislation, because the current version of the sixth method does not help to create a more predictable business climate in our country, and it is not consistent with the tools proposed by the OECD to examine these types of transactions.

Silvana Blanco Deloitte Argentina Florida 234, 5th Floor Ciudad Autonoma de Buenos Buenos Aires C1005AAF Tel: +54 11 4320 4046 siblanco@deloitte.com www.deloitte.com Silvana Blanco is a partner in the transfer pricing service team of Deloitte Argentina. She has been working at the transfer pricing department since its inception. From the beginning of the application of transfer pricing standards in Argentina, Silvana has participated actively with tax administration officers. She has more than 16 years of experience in the application of tax, economic and financial criteria in transfer pricing, valuation analysis of intangibles, planning, business model optimisation, structuring and economic consulting. Silvana has extensive experience in fields such as the coordination of multi-country transfer pricing assignments for multinational groups, the optimisation of tax burdens and information requests posed by tax authorities in areas such as the automotive industry, the oil seeds industry and the pharmaceutical industry. She has actively participated as a speaker in seminars and conferences including "Bolsa de Cereales de Buenos Aires", "Consejo Profesional de Ciencias Económicas de la Capital Federal", "Bolsa de Comercio de Rosario" and "Asociación Argentina de Estudios Fiscales". She has written many articles in newspapers and local tax-specialised publications such as Ámbito Financiero, colección Errepar, the Buenos Aires Herald, World Trade Executive and more. She is the cowriter of "Manual de Precios de Transferencia en Argentina" (La Ley 2007). Silvana graduated from Salvador University as a certified public accountant and holds a master's degree in strategic business administration and marketing from Universidad de Ciencias Empresariales y Sociales (UCES). She is a member of the Association Argentina de Estudios Fiscal, which is a member of the International Fiscal Association, and she is part of the Transfer Pricing Commission.

Horacio Dinice Partner, international tax and transfer pricing Deloitte Argentina Buenos Aires Tel: +54 11 4321-3002 Fax: +54 11 4320 4066 Mobile: +54 9 11 51507222 hdinice@deloitte.com Horacio Dinice is a tax partner at Deloitte Argentina. He is engaged mainly in international tax consulting and transfer pricing matters. His experience covers a wide range of industries, but has been centred on the pharmaceutical sector for many years. Horacio leads Deloitte's transfer pricing practice in Buenos Aires and LATCO (Latin America Countries Organisation – which covers all countries in the region except Brazil, Chile and Mexico) and is a partner responsible for international tax. His experience encompasses advising multinational enterprises on the tax implications of cross-border acquisitions and other transactions, and the establishment of foreign operations in Latin American countries, particularly Argentina, Bolivia, Paraguay and Uruguay. He is the lead partner on more than 100 documentation studies per year, provides advisory for international and regional reorganisations, works on M&A throughout Argentina and has participated in various regional and global transfer pricing projects. Horacio specialises in cross-border structuring for Argentinian and Latin American companies, and has developed linked regional cross-border tax planning and transfer pricing solutions for clients. Awards, Recognitions, Achievements, and Publications Professor of Tax at the University of Buenos Aires (1986-1992) & CEMA (2006-2015); Frequent speaker at conferences focusing on tax and transfer pricing issues; Member of the AAEF (IFA member) and participant of the Transfer Pricing Commission; Author of articles in international tax publications; He participated in technical meetings of improvement and professional development in other countries; and He dictated advanced training courses organised by the company for the professional personnel. Professional Qualifications and Affiliations Certified Public Accountant graduated in the School in Economic Sciences (University of Buenos Aires, 1986).

The fact that specific TP requirements must be filed in electronic format allow the Bolivian National Tax Service (Servico de Impuestos, SIN) to perform automated analyses to identify potential discrepancies in the filings (errors, significant variations from past years, differences with peers). This will give the SIN a large database on flows and TP methods applied by international groups, as well as a tool to better prioritise audits.

Thus, taxpayers should be careful when filling out the new forms and TP reports, and should consider the potential consequences of their statements. Transfer pricing documentation should be prepared in advance of filing in the form or TP report. Indeed, having the TP documentation provides Bolivian taxpayers a full view of their TP situation, allowing them to fully anticipate and appreciate the consequences of the information provided.

Since its incorporation into the National Tax Act through Law 788 from 2002, the Colombian regulation regarding transfer pricing has considered some international references, mainly the guidelines provided by the OECD in its TP Guidelines. Although the Colombian Constitutional Court has expressly set forth that the said guidelines do not have binding force to the country, it has accepted their use as additional criteria for interpretation, a position which has also been adopted by the National Directorate of Taxes and Customs (DIAN).

The foregoing implies that, in general terms, any modification to the guidelines arising from the BEPS actions might have immediate effects in determining transfer prices in Colombia through the interpretation of the provisions. Meanwhile, there are some aspects of BEPS that do require modifications to the internal regulations, for instance those related to the documentation requirements (Action 13) or to the application of simplified approaches in the assessment of low added value intra-group services (Action 10).

In other situations, although there are elements to justify the application of the proposals included as part of the guidelines, as interpretation of the existing Colombian regulations, it is recommended that those changes are incorporated on a domestic basis in order to facilitate the resolution of any controversy that might arise from any audit process; as in the case, for example, of the re-characterisation measures associated with transactions that lack commercial rationality.

Although, to date, there is no certainty on which of the BEPS proposals will be adopted in Colombia, nor if for such purpose there will be any legislative amendments, the fact that the country is an OECD associated country shows the commitment of the government to the BEPS Project. It is expected that the BEPS proposals will be evaluated and implemented, if applicable.

Some aspects of the BEPS proposals that are interesting to be analyse from the Colombian perspective are the following:

a) Colombia does not have a clear definition of intangibles for transfer pricing purposes, but it does have examples thereof. Likewise, there are references in other regulatory sources that have been accepted in the practice for the application of the TP regime. Such references are, in general terms, consistent with those proposed by the OECD. It might be considered that the criteria for the application of the arm's-length principle developed under BEPS, could have immediate implications in Colombia, especially with regard to:

• The remuneration to entities that only provide financial resources for development, maintenance, improvement, protection and exploitation of intangible assets;

• The identification of valuable intangibles and guidelines for their analysis; and

• The development that results from the future report about the application of the profit split method.

b) Regarding the measures on risk and capital, re-characterisation is a sensitive issue on which the BEPS Project suggests some modifications with regard to the existing measures, regardless of the application of the substance over form principle. Colombia has specific re-characterisation rules regarding financial transactions that comply with certain conditions to ensure their consistency with market practices. Otherwise, it could deemed as capital contribution, and the associated payments as a distributed dividend. Although the re-characterisation is not extended expressly to other type of transactions, it might be considered that the existing regulatory framework is wide enough to allow its application by the interpretation of provisions. Notwithstanding this, it is recommended that its application in Colombia be made through the regulatory change.

c) As a consequence of Action 10, two important aspects to analyse are:

• The proposal as to commodities, in which regard the actual matter of interest is the possibility granted by BEPS for tax authorities to consider the shipment date under certain circumstances; and

• The possibility to apply simplified approaches for the assessment of low added value intra-group services.

d) As to the requirements of documentation proposed under Action 13, it will be necessary that the particular conditions of the country are evaluated as well as the goals of the Colombian government in this regard. In principle, the threshold set by BEPS looks high for the standards of the Colombian enterprises with foreign investments. Likewise, it should be evaluated how Colombia could take advantage of the information gathered by other jurisdictions with which there are bilateral or multilateral information exchange agreements.

Henderson González B. Transfer pricing manager Deloitte Colombia Henderson González has more than 11 years of experience in transfer pricing matters. This includes his participation as a manager in the coordination, supervision and development of several projects for both preparation of transfer pricing studies in order to comply with the rules of the country and also in special projects of tax and transfer pricing planning to different private companies in industries as consumer business, manufacturing, financial services, utilities, oil and gas, automotive, pharmaceuticals, advertising and marketing and business services. Henderson has been in charge of several important professional engagements including the analysis of cross-border transactions, providing assistance in the preparation of supporting documentations and informative returns for Deloitte's customers for both regional and local purposes, as well as working on special projects of TP planning such as the determination of the correct arm's-length price for transactions between related parties, preparing of TP policies for multinational groups and structuring of service centers. Henderson is a public accountant and graduated from Universidad de La Salle of Bogotá, Colombia in 2004, with the thesis "Structure and Guidelines of the International Transfer Pricing for Colombia". He has a postgraduate degree in economy from Universidad de los Andes in 2008. He also has participated in several technical, administrative and professional training courses, both local and international. Henderson speaks both Spanish and English.

No major changes have occurred since the TP rules were published in 2013 through Decree 37898-H. Nevertheless, there are three important considerations in the future of transfer pricing in Costa Rica:

• The TP analysis is increasing in DGT (Treasury) audits: methodology and TP policies with related parties are more likely to be challenged and questioned during audit, which is considered as the main aspect of the income tax review;

• The DGT established an internal BEPS committee in order to start the study of the BEPS actions and evaluate the inclusion of these actions, not only in transfer pricing regulations, but in the income tax rules as well. Results and recommendations from this committee are expected during the fiscal year 2017; and

• The DGT issued a rule for the TP informative return. The information required is very basic, including not only the identification of the related party but also the type of transaction, amount, TP method and profit level indicator (PLI) result. The deadline for the filing will be the last business day of June of each year and the first filing is considered to be June 2017, including data from fiscal years 2015 and 2016. Only big taxpayers and companies in free trade zones will be required to file this informative return.

Since the publication of the General Rule 04-2011, the Directorate General for Internal Taxes (DGII) has modified the applicable TP rules twice. Both modifications did happen in the last four years, evidencing the interest of the tax administration regarding transfer pricing. The most recent TP rules are included as part of Decree 78-14, and are based on the OECD Guidelines.

As part of the audit processes performed by the DGII in the hotel sector (one of the most important industries in the Dominican Republic), the tax administration and taxpayers began a process of negotiation of an APA for the "all inclusive" service. The process ended with an APA signed by both parties for the 2013, 2014 and 2015 fiscal years. At this moment, the DGII is requesting information in order to negotiate a new APA that will cover the 2016, 2017 and 2018 fiscal years.

For the rest of the industries, the audit processes are no different than those in Latin American countries, particularly in terms of deduction of corporate expenses, application of thin capitalisation rules and companies with recurrent losses. Since November 2014, the DGII has issued a massive notification plan, asking for details about the TP policies of the companies which continues to date.

So far, there is no evidence about discussion or law modification regarding BEPS actions, but it is likely to occur in the near future.

Alonso Erak Vargas Regional director, tranfer pricing Deloitte Costa Rica, Honduras, Nicaragua and Dominican Republic San José, Costa Rica Tel. +506 2246 5221 aerak@deloitte.com Alonso Erak Vargas is the regional director of the transfer pricing practice at Deloitte Costa Rica, Honduras, Nicaragua and Dominican Republic and has more than 14 years of experience in tax consultancy, including local and international tax planning, tax compliance, due dilligence, restructuring proposals, tax litigation, intangibles valuation and transfer pricing studies. Before joining Deloitte, Alonso worked as manager of other international tax consultancy firms, and was leader in local and interntational tax and audit projects. Alonso has been a tax professor of the Costa Rica Certified Public Accountants Institute. He is a certified public accountant (CPA) and holds a master´s degree in tax advisory.

In April 2016 Ecuador released transfer pricing reforms focused on independence rules related to auditor and tax advisers, and changes in TP rules in order to align local technical issues with worldwide criteria.

The tax reform provisions state that a total independence must exist between activities of external auditors and tax advisers (included TP services) provided to local taxpayers by the same accounting firms or their related parties.

Since the release of tax reforms, local companies have not been allowed to contract tax and TP services from the same professional firm which provides auditing services, in order to safeguard the independence and impartiality of parties.

A professional firm includes any related party or other parties framed in the same franchise, trade name, trademark, brand, or any kind of strategic alliance.

Services related to TP matters include, among others, the following:

• TP documentation services (preparation and reviewing)

• TP advisory services (including planning)

• Business model optimisation services

• Intellectual property (IP) tax planning

• APA services

• TP disputes before tax authorities (administrative or tax court)

• TP services as experts before tax courts

The restriction is applicable for two years, starting from the year before the auditing services are performed.

TP reforms enacted seek to harmonise some rules with international practices. The key changes are as follows:

• Application of the "best method" rule instead of priority or hierarchy rule for selecting TP methods

• The residual profit split method has been eliminated

• The special CUP method on import-export transactions performed by international intermediaries has been eliminated

• As technical reference, updated OECD's TP guidelines must be chosen

• Besides application of TP methods, the Internal Revenue Service (SRI) has the power to establish and oblige to apply specific technical and methodological measures to specific industries, such as:

• Special methods for evaluating and applying arm's-length principle

• Evaluation of referential prices

• Identification of sources of information regarding pricing and profitability.

• Availability of information regarding quotation time

• Economic analysis of interposition of intermediaries

The independence rules apply to reporting periods starting on or after April 19 2016 and other TP reforms entered into force on January 1 2016.

Joseph Soto Tax and transfer pricing partner Deloitte Ecuador Tulcán 803 y 9 de Octubre, Ed. El Contemporáneo, Piso 12 Guayaquil Tel: + 593 (4) 3700-100 Ext.: 1111 jsoto@deloitte.com Joseph Soto is an international tax partner in the Guayaquil office of Deloitte Ecuador. He has more than 20 years of experience in tax consulting and transfer pricing for local and multinational enterprises. He is the tax and transfer pricing partner and the TP leader for the Ecuador office. Joseph has a portfolio of clients that includes multinational and local business groups to which he provides advisory services, tax planning, due diligence services, and tax advice on M&A, including manufacturing, distribution, commercial, telecommunications, services, shipping, airlines and others. He is a graduate of the University of Guayaquil and holds an executive master's degree in business administration. He is also a member of the Ecuadorian Institute of Tax Law and the Deloitte tax practice commission. Joseph has taught taxation subjects in some Ecuadorian universities and he has participated as a speaker in business development seminars and in tax matters and TP programmes. Joseph regularly contributes articles to various publications on tax and transfer pricing topics.

There have not been any changes in the TP regulations since the last amendment in 2014. Nonetheless, it is important to mention that the Treasury (Ministerio de Hacienda, MH) has recently promoted a draft reform to the Tax Code that is expected to be in force in the near future. This reform would set new provisions for taxpayers regarding TP obligations, methodology, documentation and penalties.

During the last year, as well as in other countries in the region, the MH has increased its audit processes on TP, requesting more information on inter-company transactions such as intangible royalty payments, and services and financial transactions. The audit procedures are mainly focused on the largest taxpayers, regardless of the industry in which they operate.

Taxpayers must be aware of the specific characteristics of local TP rules, since the scope of the term "related party" is wider than that of foreign inter-company transactions and they may even include non-controlled transactions. Contingences of non-compliance are due to the lack of knowledge of this particular issue, compared with other laws.

Another distinctive item in the review process from the MH is the verification of the domicile of selected comparable companies, since the law states that those located in preferential tax regimes or tax havens cannot be used as reference for the analysis in the TP study.

In the carried-out audit processes, the MH has paid special attention to the compliance of formal obligations, not only the TP documentation as non-compliance involves a penalty based on the company equity.

Additionally, there have been cases resolved in administrative courts where adjustments due to losses in transactions with related parties have been confirmed, since these are not admitted as deductible from income tax.

To date, local legislation has not been adapted to the OECD's BEPS recommendations.

Federico Paz PartnerTax & legal Deloitte El Salvador Tel: +503 2524 4100 Fax: +503 2524 4126 Mobile: +503 7854 6968 fepaz@deloitte.com Federico Paz is the leader of the tax & legal practice in El Salvador Office with more than 20 years of experience providing tax advisory services. His main experience includes corporate tax advisory, international tax consulting in Central American countries, transfer pricing projects, tax defence and due diligence processes. As part of his professional development he has participated in different international courses. He holds a bachelor's degree in business administration (BBA) from Franklin University. He has also participated as speaker in several local and international seminars and conferences on tax and transfer pricing topics. He is member of the tax committee of the American Chamber of Commerce in El Salvador. Federico's experience mainly relates to tax and business advisory, including the following service lines and solutions: tax consulting, tax compliance, tax planning, international taxes, M&A, joint ventures, strategic tax-related planning, tax reviews, tax audits, tax due diligence, tax controversy services and transfer pricing. He has also leaded some relevant due diligence processes in the region. Federico speaks Spanish and English.

The first cycle for compliance with substantial and formal TP obligations in Guatemala was completed for the 2015 fiscal year, for which the Superintendency of Tax Administration (Superintendencia de Administración Tributaria, SAT) implemented an electronic informative return linked to the annual income tax return for those taxpayers that declared that they had controlled transactions with non-resident related parties impacting on their local taxable basis.

In addition, the SAT requires the filing of the 2015 TP study through personal notifications to each taxpayer, as the local tax law provides the obligation for such a filing within the 20 business days subsequent to the personal notification. Spreadsheets supporting the comparable set including selection and rejection of comparable companies were also required.

Considering all of the 2015 documentation and information gathered by the SAT, a high level of TP audits is expected for late 2016 and early 2017, giving the SAT the opportunity to show its TP audit approach and capabilities for the first time.

Byron Martinez Partner | Tax & Legal | Transfer Pricing Deloitte Guatemala 5 Avenida 5-55 zona 14, Europlaza Torre IV, Nivel 8. Guatemala, Guatemala 01014 Tel/Direct +502 2384 6500 bymartinez@deloitte.com www.deloitte.com/gt Byron Martinez is the leader of the Deloitte Guatemala transfer pricing practice. In addition, he is the tax risk leader for Deloitte LATCO, the cluster organisation comprising 15 Latin America countries. With the first-time adoption of transfer pricing regulations by Guatemala in 2012, Byron took the charge of developing the Deloitte Guatemala transfer pricing practice. During his 25-year practice as tax and transfer pricing consultant, his industry experience has covered: banking and finance, consumer business (retail, food and beverages, pharmaceuticals, etc.) oil and gas, utilities, telecommunications, services, manufacturing, transportation, real estate, exporting and free trade zones. Byron has published numerous articles on transfer pricing and speaks frequently on transfer pricing issues. He holds a public accountant and auditor degree from the Universidad Rafael Landivar and a master's degree in finance from Universidad Galileo, both in Guatemala City.

Since the publication of Decree 232-2011 and its bylaw 027-2015, the Executive Directorate of Revenue (Dirección Ejecutiva de Ingresos, DEI) has not made any modifications to the TP rules. Nevertheless, the audit processes reviewing TP are increasing. Likewise, the control process over all taxpayers that must file the informative return is stricter than ever.

Honduras's TP rules are based on OECD guidelines, and evaluate not only transactions with foreign related parties but also transactions between local parties. As with other countries in the Central America region, the DEI is beginning to analyse the BEPS actions in order to include new tax requirements in the future.

According to Act 822, transfer pricing rules are supposed to have been applicable from January 1 2016. After discussions and negotiations between consultants, taxpayers and the Directorate General of Revenue (Dirección General de Ingresos, DGI), an extension was approved and the TP regulations will be applicable from June 30 2017. So far, the TP bylaw has not been published and it is still to be determined how the TP rules will affect the transactions with related parties that occur before the applicable date.

As in the case of Honduras, Nicaragua's TP rules are based on OECD guidelines, and evaluate not only transactions with foreign related parties but also local companies.

Transfer pricing regulations have not changed in the last two years, meaning that the government's strategy to increase tax contribution has been to implement mechanisms for quick collection such as VAT withholding and massive tax audits.

In early 2015, it was observed that audits focused only on transfer pricing, omitting other elements affecting the determination of taxable income.

Since 2016, audit processes from the DGI's perspective have been wider in scope, including income tax, VAT and other taxes, as well as TP.

On the other hand, the Panamanian Government has announced its interest in applying mechanisms to exchange tax information automatically, responding to the fiscal transparency standards and the OECD requirements.

Following the above, due to a trade conflict between Panama and Colombia in the World Trade Organization about custom duties on footwear and textile imports in the Colon Free Trade Zone, there is a proposal to amend the retaliation law which may lead Panama to a tax reform that includes a tax on dividends of up to 40% in cases of companies located in countries that have discriminatory treatment against Panama.

As for the BEPS Project, although there have been no official communications from the government regarding the adoption of certain measures or adjustments in legislation, we believe Panama will join this plan in the short term, given the pressure from the OECD.

Rosemari Cordero Director, International Tax and Transfer Pricing, Central America Team: Panamá Deloitte Panama Tel: + 507 303-4100 rcordero@deloitte.com Rosemari Cordero is the senior manager in charge of transfer pricing issues in Panama. She has more than 18 years' experience in national and international taxation, participating in tax returns, tax reviews, tax planning, due diligence, successions, organisational structures, indirect tax, international tax, transfer pricing and accounting. Her professional career began in Deloitte Venezuela – Lara Marambio & Asociados, starting from a bookkeeper to become the director of tax. Since 2012, she has developed the practice of international taxation and transfer pricing at the Deloitte office in Panama. Rosemari is a certified public accountant with a master's degree in business tax management. She is a member of the International Fiscal Association (IFA) and procured a certificate from the International Tax Centre Leiden Latin America in 2016. Rosemari speaks Spanish and English.

Up to now, there is no formal pronunciation from the national revenue authority, SUNAT, about the introduction of the BEPS plan into Peruvian TP rules. However, considering the intention of the Peruvian government to become part of the OECD and the active involvement of SUNAT officials in BEPS planning committees, there are high expectations in the local tax environment that local tax rules will include BEPS recommendations in the short to medium term. In fact, local tax practitioners consider this will be a major challenge for SUNAT given the particularities of Peruvian tax legislation.

One of the expected changes is related to high-value intangible analysis. This is because local rules still provide very limited information for the identification and determination of the market value of those kind of operations. That is why changes are expected to include, for instance, a specific definition of the intangible concept and alternatives for using TP methods, different from the residual profit split method (which according to our local tax rules would be the only method accepted for this purpose, although it is practically inapplicable in our local tax practice). Additionally, local rules are expected to specifically allow and define the application of different methods or valuation techniques commonly used for the determination of the market value of intangibles.

Secondly, modifications related to the "sixth method" are also expected to occur. This is in order to be applicable in practice and for the taxpayers to have a legal framework to establish market prices for commodities transactions with certainty. It is important to mention that the sixth method is a particular approach of the CUP method introduced into Peruvian legislation only for the analysis of the import and export of commodities. Nonetheless, and unlike Argentina, this introduction is still incomplete and thus not yet applicable.

In this sense, we expect that the sixth method included in local rules will adopt the recommendations proposed by the OECD in relation to commodities transactions. This may bring about an important challenge for the rules, since the recommendations proposed in the BEPS Project have a more flexible approach, particularly in relation to the pricing date.

Third, we consider that our local rules should incorporate the OECD's suggestions on intra-group services, specifically the ones related to the definition of intra-group services and low value-adding intragroup services, selection of the most appropriate method, and supporting documentation of such services. Although, there are concerns about the introduction of the "simplified approach" proposed by the OECD. It is expected that this approach will be limited to situations where costs do not exceed specific thresholds.

Finally, regarding Action 13 and in order for it to be applicable, it is necessary that our local tax rules require the three levels of documentation suggested by the OECD: master file, country-by-country report and local file. Changes are expected to occur in the local rules and to be in force starting from 2017 or 2018. Also, these new documentation requirements will imply modifications to the sanctions regime related to the non-compliance of the TP formal obligations.

Jenny Morón Transfer Pricing Partner Deloitte Perú Jenny Morón is a partner in Deloitte Perú's transfer pricing department with 13 years' experience. Apart from being an expert in the development of transfer pricing technical studies, she has higher proficiency in the realisation of transfer pricing planning and valuation in a wide range of operations of different complexity. Additionally, she has participated in the development and implementation of share service centers and different TP regulations cases. Jenny holds a graduate degree in economics from Pontificia Universidad Católica del Perú. She is a speaker at transfer pricing courses in universities, for tax administrations, Chambers in Peru, and at different tax events.

The Dirección General Impositiva (DGI) has maintained its focus on TP issues when performing tax audits. The most common issues being challenged are loss-making products or lines of business, management services received and the characterisation of Uruguayan entities for TP purposes (i.e. as a low-risk distributor).

The DGI has increasingly relied on local comparables for determining arm's-length profitability, doing so by referring to the Uruguayan Register of Financial Statements.

A second team specialising in TP audits was created during 2015 within the medium-sized companies division. Previously, TP audits had mainly been carried out by the large taxpayers division.

Uruguay has been adopting measures to converge with international standards. In this context, a bill was submitted to parliament in August, and is highly likely to be approved before the end of 2016.

The bill proposed amendments to four relevant topics, one of which is in line with Action 13. Should the bill be passed:

• It would be compulsory for financial institutions to inform the DGI about bank account balances. This applies both for resident and non-resident companies and individuals;

• It would be compulsory for resident and certain non-resident entities to provide information to a register about their owners as well as their beneficial owners in certain cases;

• Transactions with companies located in low tax countries or jurisdictions would be severely penalised with higher withholding rates, or by considering part of their income – derived from transactions with local taxpayers – as Uruguayan source income and taxed accordingly; and

• The DGI would be able to require the country-by-country report and master file documentation from a local taxpayer of a multinational group that it is not obliged to submit the same information before any tax authority of a country with whom Uruguay has signed an exchange of information agreement which is effectively implemented.

Alejandra Barrancos Senior Manager – Tax & legal | Transfer pricing Deloitte Uruguay Montevideo Tel: +598 2916 0756 Ext. 6255 Fax: +598 2916 3317 abarrancos@deloitte.com Alejandra Barrancos is a senior manager in the transfer pricing practice of Deloitte Uruguay. She has been working in different areas of Deloitte's tax department since 1997. She also worked for the transfer pricing practice of Deloitte Argentina for a few months. During this period, Alejandra accumulated significant experience through providing various advisory services for foreign companies: tax compliance, local and international tax planning and transfer pricing. Her experience in transfer pricing includes planning projects, documentation projects and defence in tax audits for a wide variety of companies in different industries. She has received a wide range of training locally in the tax area and has participated in several TP courses in Uruguay and abroad. Alejandra is a professor of the international taxation course for the Catholic University's postgraduate taxation degree and she is a member of Instituto Uruguay de Estudios Tributarios, which is a member of the International Fiscal Association. Alejandra is a certified public accountant, having graduated from the Universidad de la República Oriental del Uruguay, and holds a postgraduate degree in taxation from the Catholic University.

The three most innovative TP matters in Venezuela are:

• Support in TP audits, mainly as expert witnesses in the administrative process of the hierarchical appeal on TP matters. In recent years it has been common for the taxpayer, after receiving an objection writ, to file a notice of disclaimer. Once the Integrated Customs and Tax Administration Service (Servicio Nacional Integrado de Administración Aduanera y Tributaria, SENIAT) responds and reaches a decision on the indictment (within a two-year term), the taxpayer must make the payment of the adjustment determined. The expert witness process is innovative because a few companies have continued the process (i.e. following administrative stage – hierarchical appeal – to continue with the defense process).

• Tax planning on TP matters, mainly review of policies agreed upon with foreign-related parties to evaluate profitability to be obtained in Venezuela. These services have been very innovative in the past few years since in view of the limitations in Venezuela (exchange control and various other regulations) companies look for ways to optimise their TP policies with the aim of complying with the Venezuelan regulatory framework.

• Assistance on tax inspection (formal duties) on TP matters. This is very important since the reviews by SENIAT have intensified in recent years. The scope of the work has been both to support taxpayers in advance so that they have the information required by SENIAT available in case of an eventual tax audit and to support them once the audit starts.

There is some concern about how the BEPS actions may affect the documentation of taxpayers in Venezuela. For such purposes, Article 115 of the Income Tax Act establishes that all the information that is not regulated by it may be checked with the 1995 OECD guidelines and its amendments.

Consequently, it is important to warn multinational groups with a presence in Venezuela that its related entities will be subject to new formal obligations.

Iliana Salcedo Transfer Pricing PartnerTax and Legal Venezuela Lara Marambio & Asociados, Member of Deloitte Urbanización La Castellana, Avenida Blandin, Torre Corpbanca, Piso 18. Caracas Tel: +58 (212) 206 8778 isalcedo@deloitte.com Iliana Salcedo is a certified public accountant who holds a master's degree in tax management. She has more than 16 years of experience providing tax-technical advisory in transfer pricing matters. She contributes to the development of the Deloitte's Andean region transfer pricing practices. Iliana has a wide range of experience in the preparation and review of transfer pricing documentation in different industry sectors, including the automotive, health and pharmaceutical, basic materials, food, mass consumption products, textiles, finance and insurance, mining, chemicals and service industries. She has been actively involved in the development of projects for documenting and designing transfer pricing policies, strategies and structures for multinational groups. She also has experience in the preparation of the defence for Venezuelan transfer pricing audits. Iliana is a speaker at various transfer pricing-related conferences in the Andean region. Her main clients include Cervecería Polar, Alimentos Polar, Pepsi Cola de Venezuela, Snacks América Latina, Bayer, Laboratorios Wyeth, Iveco, Gabriel de Venezuela, Interamericana de Cables, Schlumberger and Grupo Pride, among others.