Transfer pricing basics

Transfer pricing is a set of rules and methods used to establish the prices at which transactions between related companies are carried out, in order to avoid tax evasion.

This type of transaction may include the sale of goods, the rendering of services, or the use of intellectual property, among others.

In this sense, it is important to highlight that related companies have incentives to fix the prices of these transactions at a level that allows them to minimize the payment of taxes, therefore, tax regulators have implemented measures to avoid this practice and to guarantee that the prices of these transactions are consistent with market prices.

As a result, in recent years we have seen changes in transfer pricing regulations, a trend that is expected to continue to develop in the near future.

Indeed, at the international level, countries are expected to adopt greater measures to combat tax base erosion and profit shifting, and one of the mechanisms for this is the application of transfer pricing.

In particular, in Mexico this issue became relevant with the addition of article 76-A of the Income Tax Law, this legal precept is directed towards taxpayers that enter into transactions with related parties and that, therefore, use transfer pricing.

Therefore, it is important for companies to be informed and prepared to adapt to these changes. Adequate documentation and analysis of intercompany transactions are essential to ensure that the prices established comply with tax requirements and avoid penalties.

In addition, it is important that companies carry out a detailed review of their transfer pricing policies, adjust them accordingly to comply with regulatory changes, and have the documentary support to back up transactions with related parties, as non-compliance with transfer pricing rules can result in tax penalties, fines and a negative image for the company.

Thus, despite the challenges presented by transfer pricing changes, they can also be an opportunity for companies to improve the management of their operations and comply with their tax obligations, since good transfer pricing management can help companies to optimize their profits and minimize tax risk.

Derived from the above, the tax team of Vega, Guerrero & Asociados is at your disposal to provide the corresponding support and advice for compliance with these provisions in tax matters.


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