During the course of 2021, both the local and international Transfer Pricing regulations underwent changes, specifically and for the purposes of the Dominican Republic, Decree 256-21 was published, which modified the Regulations on this matter, while internationally, the Organization for Economic Cooperation and Development (OECD) published an updated version of the Transfer Pricing Guidelines for Multinational Companies and Tax Administrations. All this, without leaving aside the evolution and constant discussion that the action plan against the erosion of the base and the transfer of profits developed by this same organization has had, specifically, on the application of pillar 2 that, said to be By the way, this is the precursor plan for the local changes detailed above.
Thus, the context and particularities of some new parameters for the analysis of financial operations between related parties should not be something new, nor should those related to the approach to analyzing intangibles that are difficult to assess and the same with regard to the method. of profit sharing, to which more attention has been given in order to be able to document the generation of value of the multinational group.
The truth is that all of them, in one way or another, address the prevailing need to go back and validate the quality of the information that has been used to prepare the Transfer Pricing analyses, and that support the reasonableness of both the methodological and analytical part, and obviously, of the results that this document reflects. In practice, this should translate into going back to basics and constructively criticizing whether the narrative and other justifications about the business of the local taxpayer, their participation in the generation of value and about the form and basis used to determine the remuneration, is sufficient and coherent, both with the analysis carried out and with the requirements and obligations of the law.
Although it is true, the local Transfer Pricing regulations have a tax adjustment procedure in cases where it is concluded that there was an impact on income tax, as a result of intercompany relations, potential discussions with regulatory entities are not necessarily they would limit themselves to validating the conclusions and results of the information that the taxpayer must provide.
For this reason, we insist once again on the need to clarify the bases on which an analysis of this nature is prepared and that, ultimately, allow us to demonstrate that intercompany transactions do not represent an imposed condition, an obligation or a straitjacket that results in a lower questionable tax base for local or foreign tax purposes.
—The author is Transfer Pricing Partner Deloitte Dominican Republic