Paraguay's tax authority (SET) has issued General Resolution No. 115/2022, which provides detailed rules on the preparation and submission of the transfer pricing study and additional reporting requirements established by Law No. 6380/2019 and regulated by Decree No. 4644/2020.
General Resolution No. 115/2022 reiterates that the following taxpayers are required to prepare and submit a technical transfer pricing study (Estudio Técnico de Precios de Transferencia or ETPT):
- Taxpayers with gross income exceeding PYG 10 billion in the previous year that enter into operations with non-resident related parties or with resident related parties if the transaction for one of the parties is exempt or otherwise not subject to corporate income tax (IRE); and
- Taxpayers that carry out operations with non-residents in countries or jurisdictions with low or no taxation or with users of free zones or maquiladora companies, unless it is proven that the other party is not related.
Taxpayers settling IRE under the Simplified Regime for Medium-Sized Businesses (SIMPLE) or the Simplified Regime for Small Businesses (RESIMPLE) are exempted from the obligation to submit, even if either of the above conditions is met. However, taxpayers not subject to the ETPT submission requirements may still be required to submit documentation at the request of the SET to confirm that their operations with related parties comply with the arm's length principle.
General Resolution No. 115/2022 also details the minimum required content of the ETPT. This includes 24 prescribed items, with elements of both the Local file and Master file developed under BEPS Action 13. The prescribed items include:
- Fiscal Year to which the ETPT corresponds;
- Name, domicile, and fiscal residence of the related persons with whom operations are carried out;
- Description of the type of relationship with the related persons (direct or indirect in the administration, control, or capital of another; residence in countries with low or no taxation; users of free zones or maquiladora companies);
- Description of the multinational or national group, as appropriate, including:
- name of the controlling entity of the group and the history or background of the group;
- organizational structure;
- corporate or shareholding structure;
- description of the business lines and products, as well as the main geographical areas where the group carries out transactions;
- functions performed by the group, including research and development, manufacturing, distribution, marketing, promotion, sales, administration, development, enhancement, maintenance, protection and exploitation of intangibles, and other relevant functions;
- other relevant aspects of the group, such as details on the intangibles or value generators (relevant competitive advantages) of the group, as well as other conditions or attributes that generate significant value;
- transfer pricing policies of the group; and
- main competitors by line of business;
- Description of the local entity (taxpayer), including:
- organizational structure of the entity and each of its business units, if any;
- corporate or shareholding structure;
- description of the business lines and products;
- main customers and unrelated suppliers;
- main competitors by line of business; and
- other relevant aspects of the local entity, such as details on the intangibles or value generators (relevant competitive advantages) of the entity, as well as other conditions or attributes that generate significant value;
- Description of the operations with related parties and the operation amounts with each related party;
- Analysis and selection of the analyzed party, be it the local entity or the foreign one, with a description of the analysis, including the functions performed, risks assumed, and assets used;
- Description of contractual terms, including information on the parties involved, the object of the contract, the amount or consideration agreed to and the currency, the form of payment, etc.;
- Characteristics of the operations in accordance with the provisions of Article 36 (1) of the Law, which concerns comparability;
- Economic circumstances of the operations;
- Commercial or business strategies of the transactions of the analyzed entity, be it local or abroad, including those related to the penetration, permanence, and expansion of the market;
- Details of the assessed facts, documentation, and other circumstances that have been taken into account for the study;
- Details and quantification of the operations included in the regime of the Special Regulations for the Valuation of Operations (i.e., the transfer pricing rules as established by Law No. 6380/2019);
- Method used to determine the prices of the operations, indicating the reasons and justification that the method is the most appropriate, as well as the reasons why other methods were not used were discarded;
- Profitability indicator applicable to the selected method, as appropriate;
- Identification and information on each of the comparables selected for the justification of the transfer price;
- Adjustments made to improve comparability, as appropriate, for the part analyzed, indicating the need for their implementation and technical reasonableness;
- Identification of the sources of information from which the comparables were obtained, as well as a description of the process for selecting and discarding comparables, and the date on which the analysis was performed;
- Details of the comparables that were discarded with an indication of the reasons for discarding that were taken into consideration;
- The quantification and methodology used to make the necessary adjustments to the selected comparables;
- The determination of the median and the interquartile range;
- The detail of the financial information used for the analysis and the identification of the respective source of information;
- The conclusion of the analysis for each valuation methodology applied and, where appropriate, the transfer pricing adjustments necessary to comply with the arm's length principle, as well as the conclusions of the study and, if applicable, a summary of the transfer pricing adjustments necessary to comply with the arm's length principle; and
- Additional information, including annexes.
In addition to the above, it is also provided that export operations involving goods (commodities) subject to the sixth transfer pricing method, i.e., goods with established market prices, should not be included in the detailed analysis of the ETPT. However, the ETPT must include a specific section indicating the amount of exported goods, the amount of exports of said goods made with related parties, and the type of relationship, corresponding to the reported fiscal year. Further, it is provided that taxpayers must take into account the list of types of operations with related parties as provided in the Annex to the General Resolution.
General Resolution No. 115/2022 provides that the following operations are excluded from transfer pricing analysis and not included in the ETPT:
- Forestry activities and the disposal of urban and rural real estate that are part of the fixed assets of the IRE taxpayer, when the net income from Paraguayan sources is determined by applying the optional presumed tax base (30% of income);
- International operations, when the net income from Paraguayan sources is determined by applying the optional presumed tax base (30% of income), which includes container leasing, international transport operations, and certain others;
- Capital contributions in cash, as long as they are in the legal currency of Paraguay.
- Reclassifications or offsets of accounting accounts related to assets, liabilities, or equity, as long as these do not affect or may affect the income statement or the determination of the profitability of the analyzed entity;
- Cash payment of capital gains (dividends) or liabilities, as long as these are made in the legal currency of Paraguay;
- Operations that have been carried out with companies or organizations and entities of the State; and
- Operations of the IRE taxpayer with related parties resident in Paraguay, when for both parties, said operations are not exempt from IRE or not covered by IRE.
General Resolution No. 115/2022 provides that the ETPT must be submitted in PDF format, and the working papers used in performing the analysis must be presented in a spreadsheet format (xls. xlsx., or odt.) including the formulas applied. In addition, a qualitative and quantitative summary of the operations with related parties carried out by the taxpayer, as covered in the ETPT, must be reported in the SET's Marangatu System, including details on the taxpayer, the related parties, the operations carried out, and other information requested by the SET. As part of this additional information, taxpayers must indicate whether or not their group is required to submit a Country-by-Country report, and if so, provide the name of the reporting entity and its country or jurisdiction of residence.
Taxpayers must submit the ETPT annually, together with the working papers that support it, exclusively through the Marangatu System. The submission is treated as an informative sworn statement (DJI), with the exact deadlines in line with the DJI schedule established by General Resolution No. 38/2020, which includes fixed dates from the 8th to the 26th of the month depending on the last digit of the RUC number. Considering the DJI schedule and the end of the taxpayer's fiscal year, the standard due dates are as follows:
- Fiscal year ending 31 December - ETPT due in July of the following year
- Fiscal year ending 30 April - ETPT due in November of the same year
- Fiscal year ending 30 June - ETPT due in January of the following year
However, an extension is provided for fiscal years ending in 2021. For fiscal years ending 30 April 2021, 30 June 2021, and 31 December 2021, the deadline to submit the ETPT is 31 October 2022. Further, it is provided that the ETPT may be submitted in the required format using an external storage medium (CD, DVD, or USB memory). The use of an external storage medium for submission is also allowed for fiscal years ending 30 April and 30 June 2022, although the standard submission deadlines apply.
Lastly, taxpayers subject to the requirement to submit the ETPT are required to update their RUC registration within 30 days after the end of the corresponding fiscal year to reflect their obligation to submit. Where the taxpayer has not carried out controlled operations subject to the rules for two consecutive years, they may request deregistration of the obligation within 30 days after the end of the fiscal year. An extension to 31 October 2022 is also provided for this purpose for fiscal years ending in 2021.