Venezuela: Trends in Transfer Pricing

Transfer Pricing Division

► Nelson Landaeta C.
nlandaeta@plafincorp.com
www.plafincorp.com
Agenda

 Recent developments on transfer pricing in

Venezuela
 Issues considered by the SENIAT to start an audit
process on transfer pricing
 Basic aspects considered by SENIAT during a
Transfer Pricing audit process
 Recommendations to be prepared for an audit
process
Recent developments on transfer pricing
in Venezuela
 Recent developments on transfer pricing in
Venezuela
 Seniat has issued several TP
assessments to relevant multinational
corporations in diverse industries,
which have been publicly informed:
 Automotive: Mitsubishi Motors,
Mack, Chrysler; GM
 Oil Industry: Shell Venezuela,
Exxon Mobil, Eni
 Pharmaceutical: Pfizer Venezuela,
 Food Industry: Alimentos Heinz
 Inclusion of thin capitalization rules
during 2007 VITL amendment;
 During the past six years, the
transfer pricing personnel from
SENIAT has being participating in
joint training sessions with other
tax authorities in Mexico and
Europe.
 Adoption of the updated OECD
transfer pricing guidelines
approved on July 2010.
 More aggressive presence of tax
authority in transfer pricing
auditing process
Issues considered by the SENIAT to start
an audit process on transfer pricing
 Issues considered by the SENIAT to start an audit
process on transfer pricing
 Taxpayers with costly debts and interests
from long term loans effected with their
respective related foreign party
 Changes in TP methods without adequate
justification from one year to another year;
 Profit Level Indicators (PLI) below the first
inter quartile arm’s length range;
 Significant payments to related parties for
intra group services and technical assistance;
 Linked cooperation among all the Main
Customs Tax Administration and the TP
Administration;
 Rejection of the use of foreign Global
Master File TP documentation;
 Using non updated financial information
from comparable companies up to June
of the FY subject to study;
 Inconsistency between TP report, Income
Tax Return and PT-99 Form;
 Showing lower operating margins
comparing with operating margins from
previous year.
 Late filing of PT-99 Form.
Basic aspects considered by SENIAT
during a Transfer Pricing audit process
Basic aspects considered by SENIAT during a Transfer
Pricing audit process
 Review of compliance with the  Analysis of financial information
requirements set under Article 169 of used: (Historical / re expressed)
the VITL, the transfer pricing study (aggregated / segmented);
and all supporting documentation for
 Selection criteria for external
each transaction subject to analysis;
comparable (TNM)
 Contemporaneity of the comparable
 Review of economical analysis set run process
aspects such as:
 Review of the acceptance and
 Internal comparable rejection;
rejection matrix contained in the
 CUP method discard; study;
 Discarding other methods;

 Characterization of the entity

based on their functions, assets
and risks (TNM Analysis);
Recommendations to be prepared for an
audit process
Recommendations to be prepared for an audit process
 Carry out regular meetings between the Finance area and / or tax, operations
and marketing areas in order to handle details on its operational aspects and
its relationship to transfer pricing issues that could arise from them;

 Identify potential service providers (prove non-availability of services locally)

in the case of payments for technical assistance;

 Make sure to have all the supporting documentation evidencing the reception
of services from a foreign related party;

 Supporting documentation language: Spanish

 Establishment of procedures through which the supporting information is

properly filed prior to the start of an audit process.
 Thanks for your attention !

► Nelson Landaeta C.
nlandaeta@plafincorp.com
www.plafincorp.com