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Through Resolution NAC-DGERCGC17-617 published on December 28, 2017 in Official Register Supplement 149, the Resolution of SRI 532 of 2016 was modified, in which aspect was established as a deadline of consultation, financial information to be used among others. The changes to this Resolution are the following:

 

1. Deadline for consulting financial information of comparable companies:

Resolution 532-16

Amended Resolution 532-16

literal a) of numeral 3 of article 2

[...] the last information of independent third party must be used on the last working day of the month of February of the following year that the one analyzed, provided that the accounting closing of this information has been set after August 31 of the year analyzed.

literal a) of numeral 3 of article 2

[...] the last information available of independent third party to be used must be up to April 10 of the following year that the one analyzed, provided that the accounting closing of this information has been set after August 31 of the year analyzed..

 

2. Regarding the segmentation of the financial information methodology to be used

Resolution 532-16

Amended Resolution 532-16

Literal d) of numeral 3 of article 2.

d) Business Segments.- The financial information of third party used for the analysis must not include business segments that are different or additional to the operations analyzed, which imply significantly different comparability criteria that may influence the profit margin. Otherwise, the financial information must be presented technically segmented, in such a way that its effect is eliminated in a reasonable manner.

Literal d) of numeral 3 of article 2.

d) Business Segments.- The financial information of third party used for the analysis must not include business segments that are different or additional to the operations analyzed, which imply significantly different comparability criteria that may influence the profit margin. Otherwise, the financial information must be presented technically segmented, in such a way that its effect is eliminated in a reasonable manner. "No case will be accepted as valid segmentation taking into account only a proportional criteria, by the application of the same factors to the items of a financial statement.

 

3. Regarding the selection of the tested partie or subject to review, and the jurisdiction of tax havens

Resolution 532-16

Amended Resolution 532-16

 

New literals within numeral 3 of article 2.

f) Selection of the tested partie.- In order to support the selection of the tested partie, when applying margin methods, the criteria of availability and quality of information must be met. For the development of the transfer pricing analysis, the local partie should be selected.

In case that the local partie does not meet the previously detailed criteria, the analysis with the other partie may be carried out in order to calculate the profitability indicator.

g) Comparable companies located in tax havens, lower tax jurisdictions and / or preferential tax regimes.- The selection of comparable companies will not include companies located in tax havens, lower tax jurisdictions and / or preferential tax regimes defined as such according to the Ecuadorian tax legislation. 

   

 

4. Justification of the comparability adjustments

Resolution 532-16

Amended Resolution 532-16

Numeral 2 of article 3

2. Justification of the adjustments.- Any adjustment of comparability must be made once the need for its application and the technical reasonableness of both, its formulation and its effect on improving the degree of comparability must have been established qualitatively and quantitatively between the economic situation of the operations analyzed and that of the comparable companies. The corresponding quantitative demonstration should be carried out in as much detail as possible, indicating the impact on the price or indicator used and, if applicable, on the arm's length range.

Numeral 2 of article 3 replaced by:

2. Justification of the adjustments.- Any adjustment of comparability (accounting, capital and others) must be made once the need for its application and the technical reasonableness of both, its formulation and its effect on improving the degree of comparability must have been established qualitatively and quantitatively between the economic situation of the operations analyzed and that of the comparable companies. The corresponding quantitative demonstration should be carried out in as much detail as possible, indicating the impact on the price or indicator used and, if applicable, on the arm's length range.

For the consideration of accounting adjustments to the information of the analyzed party or of the selected comparable companies, the reference of the practice, principle or accounting standard for which the application of the adjustment is necessary must be necessarily justified.

 

It is important to note that the transfer pricing analysis is locally regulated in a broad and detailed manner; therefore, although it is not possible to know compliance with all the rules, it is important that the Taxpayer is aware of the formal requirements of the transfer pricing analysis so that he can verify them in his transfer pricing report . This is the main reason why we keep you updated on all the changes in the matter.

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