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Latin America: Spotlight on transfer pricing issues

On behalf of our Deloitte colleagues that focus on transfer pricing issues within the Latin American and Caribbean region, I am pleased to present this selected collection of thought papers on relevant developments and issues occurring across the region. Over the past few years, increasing trade and investment flows have fuelled a robust economic growth in many Latin American countries. As a result, it is not surprising that the region has enthusiastically embraced the arm's-length principle and enacted specific legislation to provide more certainty to domestic and foreign investors. A solid statement to this trend can be found in the number of Central American and Caribbean countries that have implemented transfer pricing rules inspired by the OECD's Transfer Pricing Guidelines in the past couple of years.

We discuss the requirements, challenges and opportunities that this new regime will present to multinational corporations operating in the region. Other countries with more established transfer pricing practices also face challenges to cope with the increasing use of intangible property, capital mobility and the digital economy that has become commonplace in the past decade. A prime example is Mexico, the country with the oldest transfer pricing legislation in Latin America. The domestic transfer pricing regime is entering into a more mature phase with a better understanding of the role of transfer pricing in the context of a modern tax system. But significant changes to the regulatory framework are urgently required or there is a risk of heading in an uncertain direction. We address some of the more pressing modifications to the existing regulatory framework regime in the context of a long awaited and much expected comprehensive tax reform.

A separate note is reserved for Brazil, which historically has established transfer pricing methods that bear little (if any) resemblance to the transfer pricing methods listed under the OECD guidelines. We summarise the new transfer pricing rules and provide an overview of the motivations and potential effects of the new rules, which are primarily focused on inbound tangible goods transactions, financial transactions, and commodity-type transactions. In a less welcome development, they are also very efficient at discouraging taxpayers from entering into intercompany outbound transactions, to the extent that one of the existing safe harbour criteria practically ceased to apply.

Given the complexity and variety of tax issues across the region, this guide should be the starting point rather than the finish line for your Latin America-related transfer pricing inquiries.

For more information regarding transfer pricing issues in specific countries, and about Deloitte's tax practice in those jurisdictions, please refer to the list of Deloitte member firm contacts contained in Deloitte's 2013 Global Transfer Pricing Country Guide, or visit

We hope you find this publication interesting and, more importantly, of practical use, and invite you to contact our leading team of professionals or your local Deloitte contact if you have any questions.

Simón Somohano

Latin America and the Caribbean Region Transfer Pricing Leader

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