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Executive summary

On 23 October 2024, the Argentine Tax Authorities (AFIP) published in the Official Gazette General Resolution 5590/2024 (GR 5590).

Title IV of GR 5590 incorporates transfer pricing provisions for the operations of Sole Purpose Vehicles (SPVs) to help ensure that the transactions are carried out as if they were executed between independent parties.

The regulations apply to the following transfer pricing issues:

• SPV transactions with local related parties
• SPV transactions with international related parties, or third parties located in low-tax, no-tax or noncooperative jurisdictions
• SPV participation in Contribution Agreements and Cost Sharing Agreements (CSAs)

SPV transactions with local related parties

Chapter A includes the transactions carried out by:

• Members (parties that constitute joint ventures — "Uniones Transitorias de Empresas" or "UTE" in Spanish — or other associative contracts) of SPVs that are incorporated in, or tax-resident in Argentina in accordance with the Income Tax Law (ITL)
• SPV owners that are incorporated or domiciled in Argentina or are residents under the terms of the ITL
• Local related entities (defined according to Article 76 of Annex I of Decree No. 749/24, which regulates the Incentive Regime for Large Investments, referred to as "RIGI")

Annex IV replicates the provisions of Title II — Rules for Evaluation of Transactions of GR 4717, which governs the transfer pricing analysis for international transactions. The main modifications are:

• When analyzing transactions between local entities, Annex IV departs from the rule of testing the local entity, established by GR 4717, and instead tests the party whose functions, assets and risks are less complex and have more reliable data for comparison.
• Annex IV incorporates a "safe harbor" rule under which the cost of certain services defined as low-value-added will be evaluated in comparison to prices that comply with the arm's-length pricing rule if the cost of the low-value-added services is determined by applying a 6% profit margin over the cost incurred in rendering the services, except for cases in which the AFIP establishes a different margin due to the sector of activity involved.

Transactions with foreign related parties, or third parties located in low-tax, no-tax or noncooperative jurisdictions

Chapter C of Title IV of GR 5590 reaffirms the obligation of SPVs to comply with all transfer pricing rules (i.e., the Income Tax Law, its Regulatory Decree and GR 4717) for transactions carried out by SPVs with related parties abroad, or third parties located in low-tax, no-tax or noncooperative jurisdictions.

SPV participation in Contribution Agreements and CSAs

The Contribution Agreements and CSAs must operate under the arm's-length principle.

The regulations' main provisions regarding CSAs include:

• Arm's-length principle: A CSA complies with the arm's-length principle if the participation of the CSA's contributors is proportional to their expected share of profits or advantages and the value of each participant's contributions is aligned with the contributions that an independent company would accept in comparable circumstances.
• Participants: Participants are those who make specific contributions to the CSA and assume risks associated with the transaction, with a reasonable expectation of obtaining a benefit or advantage from the transaction result.
• Distribution of contributions: The proportional quota of each participant in the total contributions to the CSA must be consistent with its proportional participation in the expected benefits.
• Valuation of contributions: The valuation of a participant's contributions should be adjusted to the value that an independent entity would assign in similar circumstances.
• CSA documentation: Participants must maintain detailed documentation on the CSA and the operations carried out within its framework. This includes documentation pertaining to:

• Participants and other associated companies involved in the CSA or that can be expected to benefit from the CSA
• Activities of the CSA and their duration
• Anticipated profit sharing and forecasts used to determine it
• Profits that each participant expects to earn
• Procedures for participants that join or exit from the CSA

Annual Report

Transactions with local related parties generate the obligation for SPVs to file, within six months of the fiscal year-end and via the AFIP's web service "Presentaciones Digitales" (in Spanish), an Annual Report listing all transactions with local parties.

The content of the Annual Report is similar to the provisions of Annex I of GR 4717, which regulates the preparation of the Transfer Pricing Report for international transactions.