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Modifications regarding Transfer Pricing Agreements (APA) in the Tax Reform 

April 17, 2024

Among other matters, the tax compliance project currently being processed in Congress considers the following modifications in relation to transfer pricing agreements: 

(1) Possibility of entering prior consultation. In accordance with the OECD guidelines, the possibility of a preliminary analysis of the viability of the APA is established, attaching certain background information such as the identification of the related parties involved, description of the operations and basic elements of the valuation proposal that is intended to be formulated. The Chilean IRS (“SII” for its initials in Spanish) may require further background information. 

The SII has a period of two months to respond, prior to evaluating the operations contained in the consultation. The opinion of the SII is not binding on the company, so it maintains the right to present the APA in accordance with the general rules. 

(2) The validity of the APA is extended up to 4 years, also extesible and renewable. 

(3) The possibility of extending the effects of the signed APA to up to three business years prior to its subscription is stipulated, without penal interest or fines, nor affecting the determination of other taxes outside the Income Tax Law. (Originally, it was intended to apply the tax of the article 21 on any difference in those previous years, but it was modified with the indications submitted to the Congress Finance committee). 

(4) It is established that the SII (and Customs, if the APA deals with the importation of merchandise) will monitor compliance with the agreement, for which the taxpayer must submit an annual report demonstrating the conformity of its transfer prices with what was agreed. If this obligation is not met, the SII may terminate the agreement early. 

(5) The SII response period is extended from 6 to 12 months. 

(6) There are no relevant modifications regarding bilateral price agreements or BAPAs. The expression is added “The service may sign agreements […] in which other administrations intervene […] carrying out the necessary coordination for its correct implementation in accordance with the current regulations of each jurisdiction. 

(7) Beyond the APA, a section on self-adjustment of prices carried out by the taxpayer is added to the transfer pricing regulations, being able to adjust their prices or transfer pricing values ​​prior to the SII requirement: 

“Self-adjustment of transfer prices will be understood as the one carried out by a taxpayer prior to a request from the Service and in which he determines, in his opinion, a price, value or profitability of arm’s length within the framework of a linked transaction, although said price differs from the amount actually charged between the related companies.” 

The adjustment must be added to the first category tax base (“IDPC”, for its initials in Spanish), only insofar as it means an increase in it. All records must be kept being able to accredit this self-adjustment to the SII. In the event that the SII supervises and determines another adjustment on this, the difference will be affected with article 21. 

Matías Alonso
Juan Cristóbal Ortega