Paraguay's executive branch on 9 May presented to the National Congress a draft law that, among other things, would introduce the country’s first transfer pricing regime.
Under the draft Law, the prices and conditions established in related-party transactions with domestic or foreign entities must be consistent with those in transactions between independent parties in comparable situations. The tax administration would have the authority to adjust the price and revise the parties’ taxable income and deductions if it finds that a transaction does not meet that criterion.
Transactions would be considered comparable if there are no differences that significantly affect the price or profit margin as determined through the applicable transfer pricing method or any differences could be eliminated through reasonable adjustments. When considering the comparability of transactions, the following items would be considered:
Acceptable transfer pricing methods include:
Taxpayers undertaking related-party transactions would be required to perform and keep a technical study with relevant supporting documentation showing that the prices established in the transactions are proportionate to those that would have been established between independent parties in comparable operations. The documentation should include, at a minimum, the following information:
Taxpayers whose gross income in the previous fiscal year did not exceed PYG 10 billion (approx. USD 1.5 million) would be exempt from the documentation requirement.
The tax administration would issue separate regulations detailing and clarifying the rules described above, including other required information in the documentation accompanying the technical study.