This article examines the holistic transfer pricing approach that a number of Latin American countries have been implementing into their laws following the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative. In this context, a value chain analysis (VCA) approach aligns business models, finance and/or tax positions and the governance of multinational enterprises (MNEs) with best practice under the OECD/G20 BEPS initiative.
The article is structured as follows:
- Section 2. considers the transfer pricing standards introduced by the OECD/G20 BEPS initiative.
- Section 3. provides a general description of the origin, development and approaches regarding transfer pricing practice in Latin America, which are primarily derived from the US Transfer Pricing Regulations and OECD and UN recommendations.
- Section 4. considers the changes brought about in Latin America by the OECD/G20 BEPS initiative from a transfer pricing perspective. In particular, the new transfer pricing documentation rules that have been implemented by Argentina, Brazil, Chile, Colombia, Costa Rica, Panama, Peru, Mexico and Uruguay, are addressed. The effects of the new transfer pricing rules for MNEs undertaking activities in Latin America are also examined.
- Section 5. covers the transfer pricing transactional approach described by reference to the Mexican transfer pricing system.
- Section 6. analyses the holistic approach introduced by the OECD/G20 BEPS initiative and explains the role of the VCA as a tool in the identification of the key value drivers and processes of an MNE and establishing if these factors are aligned with the allocation of profits.
- Section 7. demonstrates how the transactional and holistic approaches can be combined to align the business models, finance and/or tax positions and governance of MNEs with the OECD/G20 BEPS initiative. In this respect, the authors address the applicability of the VCA in the context of a transactional and a holistic approach to transfer pricing.
- The article ends with some conclusions in section 8.
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