The Argentinian company Materia Pampa S.A. exported products to a Brazilian company, Companhia De Bedidas Das Americas in Brazil (Ambev), via a related party in Uruguay, Maltería Uruguay S.A. There was a significant difference between the price declared on export to Uruguay and the price used for the subsequent final shipment to Brazil. An assessment was made by the tax/customs authorities, which resulted in an upward adjustment of the price received for the products from the related party in Uruguay, which in turn resulted in additional taxes and VAT. The price adjustment was based on the guidance provided in the OECD TPG, and in relation to the application of the arm’s length principle in determining prices for customs purposes, reference was made to the guidance provided in paragraph 1.137 of the 2017 TPG, which states. “The arm’s length principle is broadly applied by many customs administrations as a principle of comparison between the value attributable to goods imported by associated enterprises, which may be affected by the special relationship between them, and the value of similar goods imported by independent enterprises. However, valuation methods for customs purposes may not be consistent with transfer pricing methods recognised by the OECD. Nevertheless, customs valuations may be useful to tax administrations in assessing the arm’s length character of a transfer price in a controlled transaction and vice versa. In particular, customs officials may have contemporaneous information about the transaction that may be relevant for transfer pricing purposes, especially if prepared by the taxpayer, while tax authorities may have transfer pricing documentation that provides detailed information about the circumstances of the transaction.” ...

Malteria Pampa S.A in Argentina exported malt to a related intermediary in Uruguay that in turn sold on the goods to the brewery in Brazil at a higher price. The tax authorities applied the Sixth method and issued an assessment where the export price was determined based on the latter price used in the transaction with the brewery in Brazil. Furthermore a substantial fine was issued to the Malteria Pampa S.A. for non compliance. In February 2019 the Tax Court decided in favour of the tax authorities. “That the factual and legal points considered by the customs verification – corroborated in this pronouncement – complied with the application parameters of the TP rules invoked in the Technical Report, forming a solid conviction that the transactional prices of the sale declared in the field “Merchandise Value” of the PE 07-003-EC01-004994-P and PE N° 07-003- EC01-004995-Z of Maltería Pampa S. A. are manifestly inaccurate, constituting an under-invoicing that causes the plaintiff to engage in the conduct punishable by Article 954(1)(c) of the Civil Code, for the entry into the country -actual or potential- of an amount as an export price different from that which would have corresponded; consequently, the fine imposed by the DGA must be confirmed.” This decision was then appealed to the Federal Administrative Court. Judgement of the Federal Administrative Court The Court dismissed the appeal of Malteria Pampa SA ruled in favor of the tax authorities. “this Court hereby recognises that the interpretation that conceives of Law 22.415 and Law 20.628 as bodies of law that make up Federal Law and not as watertight compartments that run along parallel paths with no possibility of intersection is correct. The fact of export under-invoicing deserves to be analysed under the convergent application of those laws that deal with this case. From this perspective, the Chamber concludes that the application of the transfer pricing institute should be validated, in this case, so that customs can control the entry of the amount that effectively corresponds, since the operation involves the export of commodities between companies that are functionally linked.” “the veracity and accuracy of the customs declaration, as legal assets protected by section 954 of the Customs Code, involve the interest of the Federal Government in preventing price manipulation manoeuvres in international trade between companies that make up the same economic group in order to reduce prices in our country and transfer the difference to jurisdictions with lower levels of taxation and foreign exchange control, with the harmful consequences that this implies for the collection of the national treasury and the macroeconomy of the Argentine Republic.” “In view of the foregoing, the Court RESOLVES: to dismiss the appeal lodged by the plaintiff and, consequently, to uphold the judgment under appeal. With costs, as there is no merit for a waiver (art. 68, first paragraph of the CPCCN)” Click here for English Translation Click here for other translation ...

Malteria Pampa S.A in Argentina exported malt to a related intermediary in Uruguay that in turn sold on the goods to the brewery in Brazil at a higher price. The tax authorities applied the Sixth method and issued an assessment where the export price was determined based on the latter price used in the transaction with the brewery in Brazil and a substantial fine was also issued to the Malteria Pampa S.A. for non compliance. Decision of the Tax Court “That the factual and legal points considered by the customs verification – corroborated in this pronouncement – complied with the application parameters of the TP rules invoked in the Technical Report, forming a solid conviction that the transactional prices of the sale declared in the field “Merchandise Value” of the PE 07-003-EC01-004994-P and PE N° 07-003- EC01-004995-Z of Maltería Pampa S. A. are manifestly inaccurate, constituting an under-invoicing that causes the plaintiff to engage in the conduct punishable by Article 954(1)(c) of the Civil Code, for the entry into the country -actual or potential- of an amount as an export price different from that which would have corresponded; consequently, the fine imposed by the DGA must be confirmed.“ Click here for English Translation ...