EY TAX Flash - Information on operations with foreign related parties

EY TAX Flash
Information on operations with foreign related
parties. Appendix 9
On May 6, the Servicio de Administración Tributaria (“Mexican Tax Administration Service” or “SAT” for
its Spanish acronym), published on its website the revised Appendix 9 “Information on operations with
foreign related parties” of the Multiple Information return (DIM- Appendix 9). This new version of Appendix
9 It is in force since the date of its publication effective for FY2014 and for all subsequent years. The new
Appendix 9 includes 57 fields of information stated by type of operation, and has the capacity to report up
to 40,000 operations.
Below a brief explanation is given related to the most relevant modifications:
• Informationregardingforeignrelatedparty’sdata
Wording included in some fields of Appendix 9 confirms that the information requested relates only
to foreign related parties. Novelty is on field 5, which now requires further disclosure on the type of
relationship established between the parties; the option is now given to select whether the relationship is
derived form a direct or indirect participation in the management, control or capital, detailed information
of the person or group of persons involved in the management, control or capital, or if it relationship is
originated from a Joint Venture or a permanent establishment.
• Detaileddescriptionofincludedoperations
A new additional question has been included which ask if internal comparable operations (internal CUTs)
were identified/used to test the transaction. The key point here is that there is no further clarification on
whetherthisquestionreferstotheuseofinternalCUTsidentifiedinthetaxpayer’sfinancialinformationor
if they are derived from any other internal financial information (such as non-audited segment information,
to give an example).
This section also asks for any “Tax adjustments” that may have been applied for the operation to
beconsideredasarm’slength.Thisisrelevantasthisquestionreferstofiscal,andnotaccounting,
adjustments.
• Financialinformationusedtodeterminetheresultofthetestedtransaction
This section obliges to disclose information regarding the amount of earnings or sales, costs, gross profit,
operating expenses, operating profit (or loss) and average operating assets used for the analysis. It is
not clear whether the required information should consider or not the application of the Mexican Financial
Reporting Standards (MFRS) B-3. We believe that the financial information included (consolidated or
segmented) should be the one used to determine the resulting percentage of the tested transaction,
which will also match with the MFRS Bulletin B-3 (“Comprehensive Income Statement”) from the
“Information on transactions with related parties” appendix manifested on the Fiscal Report Presentation
System (“Sistema de Presentación del Dictamen Fiscal” or “SIPRED” for its Spanish acronym), or in the
Taxpayer’sFiscalReport(“Declaración Informativa de la Situación Fiscal de Contribuyente” or “DISIF” for
its Spanish acronym).
• Comparablecompanies/operations’referenceinterquartilerange
A new section has been included which directly relates to the results of the transfer pricing analysis
applied to test the transaction, among the main points required: the concept of the reference range of
values (margin or price range), numerical values (with decimal places) of the interquartile range, number
of elements included in the sample, SIC codes used to run the sample, as well as some questions related
to any adjustments applied for the operation to be deemed as agreed with or between independent parties
in comparable transactions.
• Functions
The questions in this section were barely modified; the only highlight is a question which directly
addresses the existence (or not) of a transfer pricing study that supports all operations expressed in the
statement.
In addition to the above mentioned topics, Appendix 9 includes specific questions regarding the
deductibility or accumulation of amounts subject to analysis, usage of double taxation avoidance treaties,
and all information related to the activity of the taxpayer
It is noteworthy that when using the “System tool” option and by selecting the “Import Data and Layout”
option, the generated document shows that much of the added fields are marked as optional fields,
however this condition is not visible on the online format. Since the new fields are stated as optional, the
taxpayer may decide whether or not to answer. However, if any field is left blank the validation system
returns an error message and does not allow the statement to be sent.
Changes to DIM-Appendix 9 and the Base Erosion and Profit Shifting (BEPS) project
As it is already known, within the last year the Organization for Economic Cooperation and Development
(OECD) has issued several actions to prevent tax base erosion and profit transfers within countries. These
actions are an essential part of the BEPS project: Addressing Base Erosion and Profit Shifting. Mexico as
a proactive party of this organization, has taken very specific and targeted actions arising from conclusions
and reflections of this report. As expected, there have been major changes in tax requirements, largely
related to transfer pricing issues.
This new Appendix 9 can be clearly associated to actions 12 and 13 of the BEPS action plan; these
specific actions (related to “Mandatory Disclosure Rules” and “Country by Country reporting” respectively)
have been designed with the purpose to require the transfer pricing documentation to provide very specific
details regarding concise tax information for each tax payer belonging to a multinational group. Such
information is intended to provide the tax authorities with the necessary elements and tools to define a
precisely targeted review strategy.
Therefore, as explained above, it may be considered that the new DIM-Appendix 9 is one more of the
several reports designed by the tax authority to align its strategy with the BEPS action plan, as a mean to
obtain the necessary information to identify and focus in a more accurate manner on all the impacts of any
international aggressive tax planning that may result on a transfer of profits or tax evasion on any of the
involved countries.
It should be recognized that such tools imposed by the Mexican Tax Administration (MTA) also involve
major administrative investments to be incurred by taxpayers in order to be able to provide the requisite
information with the level of detail required. This new appendix should be added to the information tools
already implemented by the MTA as of today:
o SIPRED or DISIF, - Appendix related to the information on transactions carried out with
related parties
o SIPREDorDISIF,-AppendixrelatedtotheTaxpayer’sinformationontransactionscarried
out with related parties
o TransferPricingQuestionnaire-CertifiedPublicAccountants’Review
o Information return on the Taxpayer fiscal status (transfer pricing appendixes)
o Form no. 76- Guidelines for reporting relevant transactions
Should you have any questions, request further information or require any support on the information
contained herein, please contact any of the following professionals:
Alma Gutiérrez
[email protected]
EY
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