Transfer pricing in El Salvador at a glance
|Regulation Type||National regulations|
|Are there specific transfer pricing regulations?||Yes|
|Submission deadline upon request||Directly|
|Annual update required||Yes|
|Official language requirements||Spanish|
|Potential impact of penalties||N/A|
Salvadorian tax law
Rules for transfer pricing in El Salvador are based upon:
- Salvadorian Tax Code Sections 62-A, 124-A, 135-f), 147-e), 199-A, 199-B, 199-C, and 199-D.
El Salvador is not an OECD member, but in it’s transfer pricing regulations reference is made to the OECD Transfer Pricing Guidelines.
Accepted methods are:
- The market price method
- The comparable uncontrolled price method
- The resale price method
- The cost plus method
- The profit split method
- The transactional net margin method
Priority of methods
Rules for transfer pricing in El Salvador prescribe that a taxpayer should firstly investigate the opportunity to apply the market price method (this method was established by the Salvadorian Tax Code and it is not an OECD method). When the market price method can’t be used a taxpayer should apply the best method of the OECD prescribed methods.
Information that should be included in the documentation:
The documentation requirements in El Salvador are not very explicitly set out, however, it is clear that documentation should include the following information:
- information about the taxpayer and its multinational group should be included
- a functional analysis
- criteria for selection of comparables
- applicable methodology
- supporting data and information that demonstrate that its intercompany transactions meet the arm’s length principle test
Rules for transfer pricing in El Salvador prescribe that all documentation should be submitted in Spanish.
Requirements to prepare documentation annually
In El Salvador a taxpayer is obliged to update it’s transfer pricing documentation annually.
Submission deadline upon request by tax authorities
Documentation should be submitted directly if requested by the tax authorities.
Advanced Pricing Agreements
Rules for transfer pricing in El Salvador do not provide for the option to obtain an Advanced Pricing Agreement.
Rules for transfer pricing in El Salvador do not provide for any specific transfer pricing penalties, meaning that ordinary tax penalties apply.