ISSN 1684-9833 • Year 5 / Special Edition / September 23 , 2013
The Executive Secretariat Informs New study
ITC- GIZ - CIAT Study on "General Aspects of the inflation effects on transfer pricing adjustments processes.” ITC- GIZ - CIAT Study “General Aspects of the inflation effects on transfer pricing adjustments processes.”
As a result of the collaboration among the "International Tax Compact " initiative, Germany’s GIZ and CIAT, it has been possible to conclude an unprecedented work for the international tax community, regarding the main effects of inflation on the processes of setting and adjustment of transfer prices. This work has been coordinated by CIAT’s Cooperation and International Cooperation Directorate, with experts from different countries in the region and the tax administrations from Chile, Spain, Mexico, Peru, Dominican Republic, Uruguay and South Africa, that provided information on legal and procedural aspects. The objective of this exploratory work is to analyze if the most widely accepted methodologies in the world to determine if transfer prices are set among related parties according to market values, are appropriate when the company examined is located in a country that faces an inflationary economy. Throughout the present study, several questions are discussed, among which are: Is inflation a factor to take into account in the comparability analysis? , If such is the case, can the inflationary effects be corrected by comparability adjustments? Does inflation have the same influence in all methodologies? Can we talk about acceptable inflation levels within the methodologies? Can we assume that above certain inflation levels (i.e. in the case of hyperinflation) the methodologies don’t suit the situation? Once again we thank the "International Tax Compact" for promoting multilateral cooperation, that allows the possibility of providing products and services to our tax administrations and to the international tax community in general.