Worldwide transfer pricing reference guide 2014

El Salvador (continued)
Statute of limitations on transfer pricing assessments
Under the current legislation and in particular the rules of the TC, the ordinary statute of limitations is three years; however, when no tax
return has been filed, the statute of limitations is extended to five years.
Return disclosures/related party disclosures
Disclosure in the Tax Report
Under the rules of the TC, when a taxpayer has assets with a value in excess of US$1,142,857 or sales higher than US$571,429 during the
previous fiscal year, it is required to appoint an external tax auditor (CPA) to perform a statutory tax audit and file the resulting tax audit
report within the first five months following the tax year that was audited (deadline of 31 May or when applicable the next business day).
As a part of the tax reform, subsection f) was added to Section 135 TC to include an obligation for an external tax auditor to incorporate a
note in the report regarding transactions conducted by the taxpayer with its related parties or entities domiciled in tax haven jurisdictions,
indicating if the taxpayer complies with the transfer pricing legislation (mainly the arm’s length principle).
Transfer pricing-specific returns
Article 124–A TC establishes an obligation for taxpayers to file an information return on transactions conducted with related parties
(F–982) within the first three months that follow the fiscal year-end, when these transactions (individually or in the aggregate) are equal
to or exceed US$571,429 annually.
Among the information that is required by Form F–982:
• The name of the related party or of the tax haven domiciled party
• The tax ID number, if said party is domiciled in El Salvador
• The annual amount of the transaction(s)
• The comparability criteria applied
• The methodology applied
• The comparability adjustments made
• The description of the transaction (listed includes 19 operations of income, 20 of expense, 7 of assets and 5 of liabilities)
In case of noncompliance with the filing obligation of this information return, Article 244 literal l) TC establishes a penalty of 0.5% over
taxpayer’s equity as reflected on the taxpayer’s balance sheet, minus surplus on the revaluation of assets, or at least three monthly
minimum wages (approximately US$672.63).
When there is no balance sheet, or it is not possible to determine a taxpayer’s equity, a penalty of nine minimum wages applies
(approximately US$2,018).
Frequency of tax audit and transfer pricing scrutiny by the tax authority
The risk of a general tax audit is currently categorized as medium. As part of all general tax audits, the tax authorities review in
compliance with transfer pricing regulations. Thus, the risk that transfer pricing will be scrutinized as part of a general tax audit is
medium. The tax authorities have been investing in training personnel outside the country to implement transfer pricing audit programs.
The tax authorities have already started scrutinizing the transfer pricing of some taxpayers, in order to confirm that they are complying
with the transfer pricing rules as established in the TC.
In case transfer pricing is scrutinized, the risk that the transfer pricing methodology will be challenged is low.
APA opportunity
There is no APA program available.
Expected reaction to OECD Report on BEPS
Transfer pricing provisions are relatively new in El Salvador and the DGII’s experience is still in a developing stage. Therefore, no
immediate or short term reaction is expected regarding specialized topics covered in the OECD Report on BEPS.
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