Executive Decree No. 973 published on April 19, 2016, introduced several tax reforms relating to the application of the Organic Law on Incentives for Public-Private Associations and Foreign Investment.

The reforms amended Article 2791 of the Regulations for Application of the Internal Tax Regime Law and added a new prohibition if the "independence and impartiality" parameter is not met.

It is clarified that the Tax Authority will consider as not submitted (i) the tax compliance reports, (ii) the transfer pricing reports, and (iii) the certificates from external auditors (for application of double taxation agreements) if those reports, certificates and other documents are prepared by individuals or corporations that during the previous year and the current fiscal year had issued a favorable opinion to the taxpayer in respect of its compliance with tax obligations and, besides, had rendered or are rendering the following services:

  • Tax advisory services;
  • Representation or sponsorship;
  • Preparation of financial statements; and/or
  • Cooperation as the taxpayer's experts in tax litigations against the Internal Revenue Service.

Those services cannot be provided directly or through related parties or through parties that share the same franchise, trade name or trademark, or who are the taxpayer's strategic allies.

Filing to submit those reports as mentioned above may also bring about sanctions ranging from fines to the closure of commercial establishments.

We recommend the taxpayers to take this report into account in order to prevent sanctions imposed by the Tax Authority and, therefore, to reduce any risks in their operations.

Footnotes

"To uphold proper independence and impartiality, a report comprising an opinion about compliance with tax obligations set forth in this article cannot be prepared by individuals or corporations that during the previous fiscal year and the year corresponding to the date of the report have furnished or are furnishing tax advisory services or representation or sponsorship services to the taxpayer, or those who prepare its financial statements or act as experts for the taxpayer in tax litigations against the Internal Revenue Service either directly or through their related parties or those sharing the same franchise, trade name or trademark, or strategic allies. The aforementioned tax advisory services shall include, among other things, tax planning, preparation of transfer pricing reports and other certificates and reports required by the Law and these Regulations.

Without prejudice to the sanctions listed in the third paragraph of this article, reports, certificates and other documents that fail to abide by this rule shall be deemed not submitted to the Tax Administration.

The taxpayer about whom the report comprising an opinion on compliance with tax obligations pursuant to this article is issued shall be responsible for submitting that report to the Tax Administration in the form and within the periods established through a resolution."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.