CEPAL (2016), La Agenda 2030 para el Desarrollo Sostenible y los Desafíos del Financiamiento para el Desarrollo, Santiago Chile.
Cortes Selva, Ana (2014), “Gasto Tributario y Evasión en Nicaragua: 2010–2013”, Ministerio de Hacienda y Crédito Público, Managua, Nicaragua.
Dirección General de Políticas y Estadísticas Fiscales (2016), “Actualización de Gasto Tributario de Nicaragua, 2013–2014”, Ministerio de Hacienda y Crédito Público, Managua, Nicaragua.
OECD (2015a), Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 – 2015 Final Report, OECD/G20 Base Erosion and Profit ShiftingProject, OECD Publishing, Paris.
OECD (2015b), Aligning Transfer Pricing Outcomes with Value Creation, Actions 8–10 – 2015 Final Reports, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris.
Prepared by Roberto Schatan, with the assistance of Rosalind Mowatt.
FZ were first introduction in 1976, but they were short lived.
User firms of FZ are exempt of CIT for 10 years, renewable for a second term; after they benefit from an exemption of 60 percent. Service and interest payments to foreign residents are also exempt. Ley de Zonas Francas de Exportación, octubre 8, 2015 (art. 20)
Maquila-type exports outside FZ enjoy this benefit as well as VAT and tariff exemptions for temporary imports. This regime is known as “Régimen de Admisión Temporal para Perfeccionamiento Activo”. Ley (No.302) de Admisión Temporal para el Perfeccionamiento Activo y de Facilitación de las Exportaciones, 19 de marzo, 2001.
The FZ employed over 110,000 workers in 2016, representing two thirds of total manufacturing employment in Nicaragua; source, BCN.
Revenue losses, while probably significant, can be easily exaggerated. One source of confusion is with what some authors call ‘illicit flows’, which is the difference resulting from contrasting export data from one country with the import data from the destination country (and vice versa). That difference could be explained in more than one way, some due to illicit trade, but not due to TP manipulation, which is not carried out by differences in the invoices presented in exporting and importing countries. See for example, El Nuevo Diario, Precios de trasferencia dejaran US$300 millones, Nicaragua, noviembre 20, 2015, citing CEPAL (2016) p. 135.
Ley de Concertación Tributaria (LCT), diciembre 17, 2012. (Ley No. 822). Arts. 93–106.
Ley No.922, December 17, 2015.
¿Listos para los precios de transferencia?, La Prensa, Nicaragua, diciembre 19, 2016.
Commodities understood as primary goods which have a daily international price benchmark.
Manipulation could also occur with strike prices in controlled future contracts.
See OECD TP Guidelines (2010), op cit. Profits rates (either gross or operational profits) can be measured in various ways for this purpose.
Introduced in 2003, it pioneered this type of regulation, often called the ‘Sixth method’. Ley de Impuesto a las Ganancias, art 15, sixth paragraph (which explains the name for this method). The ‘Sixth Method’ does not apply when the intermediary abroad complies with certain conditions that would indicate it is an actual trader and not simply a paper entity; further discussed below.
Dirección General Impositiva (Uruguay), Decreto 56/009, enero 1, 2009. It also allows date when contract is registered with authorities.
Ley del Impuesto sobre la Renta (Mexico), art. 180.
Ley del Impuesto a la Renta (Perú), art. 32-A, e). Modified by Decreto Legislativo 1312, December 31, 2016.
The TE includes both the net alternative minimum tax (1 percent on turnover) and the CIT forgone above that minimum. Cortes Selva (2014).
At the same time, assuming that the industry in the FZ should have a profit margin similar to the average in Nicaragua’s domestic economy, including banking and other sectors which may enjoy some economic rents, might lead to an overestimation of the TE.
Ley del Impuesto sobre la Renta (Mexico), art. 182, II.
A Safe Harbor for transfer pricing purposes is a rule whereby the authority establishes publicly a minimum profit margin above which a specific industry, under defined circumstances, would comply with the arm’s length principle.
Total cost and expenses is obtained from subtracting profits from total exports; profits are equal to the CIT TE for FZ registered in Cortes Selva (2014) divided by the CIT rate.