TRANSFER PRICING REPORTS PENALTIES

On May 29, 2024, the Resolution No. NAC-DGERCGC24-00000020 issued by the INTERNAL REVENUE SERVICE was published in the Official Register. This Resolution reformed the contents of the Annex on Transactions with Related Parties and the Transfer Pricing Report whose most relevant content is summarized below:

• Types of taxpayers

The following classification of taxpayers was included for the establishment of the amounts of pecuniary sanctions regarding the report of the Annex on Transactions with Related Parties and the Transfer Pricing Report:

1. Large Taxpayers and Large Estates;
   
   
2. Special Taxpayers; and
   
   
3. Other taxpayers subject to transfer pricing regime.

• Tax penalties for failure to file the report

Taxpayers who do not submit the Transfer Pricing Report or the Annex on Transactions with Related Parties shall be fined based on the following table:

• Tax penalties for registration of the report incompletely

Taxpayers who submit incomplete, inaccurate or erroneous information shall be fined based on the following table:

The Transfer Pricing Report or the Annex on Transactions with Related Parties shall be deemed to contain incomplete, inaccurate or erroneous information when the following are incurred:

• Not taking into consideration the Technical Sheet for the standardization of the transfer pricing analysis and the technical sheet of the Annex on Transactions with Related Parties in force for the evaluated fiscal year.
  
  
• Submit incomplete or inaccurate information, which differs between the Transfer Pricing Report and the Annex on Transactions with Related Parties, for transactions with related parties and the methodology and indicator when applicable.
  
  
• When the values declared in the income tax return, Annex on Transactions with Related Parties and Transfer Pricing Report, show differences between any of them.
  
  
• In the case of the Transfer Pricing Report, when the working papers established in the Technical Sheet for standardization of the Transfer Price Analysis in force to the evaluated fiscal year are not included.

When the taxpayer settles and pays the fine without prior notification by the Tax Administration, it shall be considered a voluntary liquidation.

If the Tax Administration notifies the taxpayer of the breach of its duties, a fine shall be issued based on the above categories.

• Sanctions regime for late registration

Taxpayers who submit information after the deadline shall be fined based on the following table:

• Fiscal year 2023 registration of reports and annexes

1. The Annex on Transactions with Related Parties and the Transfer Pricing Report for the 2023 fiscal year, may be filed until September 2024 on the same due dates as for the monthly tax returns of each taxpayer.
   
   
2. Transfer Pricing Reports for the 2023 fiscal year submitted after this Resolution, must be made in accordance with the Technical Sheet published on the IRS website, on May 27, 2024.

For more information, do not hesitate to contact our Tax Practice Partner, Iván García (igarcia@tzvs.ec).

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This publication contains information of general interest and does not constitute legal opinion on specific issues. Any analysis will require legal advice from the Firm.