{"id":636,"date":"2019-01-03T17:21:34","date_gmt":"2019-01-03T17:21:34","guid":{"rendered":"https:\/\/qcgtransferpricing.com\/en\/?p=636"},"modified":"2025-03-16T14:24:23","modified_gmt":"2025-03-16T20:24:23","slug":"open-public-forum-application-of-comparability-adjustments-including-country-risk-adjustment-and-non-binding-criteria-in-transfer-pricing","status":"publish","type":"post","link":"https:\/\/qcgtransferpricing.com\/en\/blog\/open-public-forum-application-of-comparability-adjustments-including-country-risk-adjustment-and-non-binding-criteria-in-transfer-pricing\/","title":{"rendered":"Open Public Forum: Application of Comparability Adjustments (Including Country Risk Adjustment) and Non-Binding Criteria in Transfer Pricing"},"content":{"rendered":"\n

On January 15, at the main auditorium of the Mixcoac campus of Universidad Panamericana, the open public forum \u201cApplication of Comparability Adjustments and Non-Binding Criteria in Transfer Pricing\u201d<\/strong> will take place. This unprecedented event will allow taxpayers, their advisors, and tax authorities\u2014represented by the Central Administrations of Transfer Pricing and the Central Administration for the Development of Transfer Pricing Strategies\u2014to exchange views on critical aspects that will impact the taxation of multinational groups in Mexico.<\/p>\n\n\n\n

Particular attention will be given to the proposal by the Mexican Tax Administration Service (SAT)<\/strong> regarding the application of comparability adjustments in transfer pricing, specifically the country risk adjustment<\/strong>:
https:\/\/www.gob.mx\/sat\/acciones-y-programas\/preguntas-frecuentes-en-materia-de-precios-de-transferencia-con-respecto-a-ajustes-de-comparabilidad?tab=-<\/a><\/p>\n\n\n\n

It is important to remember that, under this tax regime, taxpayers must demonstrate that their intercompany transactions are conducted under arm\u2019s length conditions<\/strong>, as if they had been carried out with or between independent third parties in comparable transactions.<\/p>\n\n\n\n

The View of Mexican Tax Authorities<\/strong><\/h3>\n\n\n\n

From the perspective of Mexican tax authorities, the frequent use of foreign “comparable” companies<\/strong> to evaluate the reasonableness of an intercompany transaction involving a Mexican taxpayer\u2014using transfer pricing methods that analyze transaction profitability at different levels\u2014should consider the implementation of a country risk adjustment<\/strong>.<\/p>\n\n\n\n

Under this approach, the sales of comparable companies from developed countries<\/strong> (such as the United States) would have to be increased<\/strong> by considering the additional return they would have hypothetically obtained if their operations had taken place in Mexico. This is based on the economic principle that higher risk demands higher returns<\/strong>, given the risk differential between the market of the comparable company and an emerging market (in this case, Mexico).<\/p>\n\n\n\n

The country risk adjustment proposal<\/strong> has sparked extensive discussion among taxpayers and advisors, mainly due to its potential impact on the reference ranges used to validate the arm\u2019s length condition<\/strong> of analyzed transactions. If consistently applied, this adjustment could increase the benchmark parameter and potentially put taxpayers at risk of non-compliance<\/strong>.<\/p>\n\n\n\n

Public Forum: Discussion and Analysis<\/strong><\/h3>\n\n\n\n

Recognizing the importance of this issue, the Transfer Pricing Commission of the National Federation of Economists<\/strong> has convened a public forum<\/strong> where leading professionals from major firms in Mexico, along with Mexican tax authorities, will analyze its implications.<\/p>\n\n\n\n

Given the significance of this topic for corporate taxation in Mexico, the forum is open to all interested parties wishing to submit technical considerations<\/strong> for discussion and evaluation. This includes organizations, business groups, and firms that are not yet part of the Federation\u2019s Transfer Pricing Commission<\/strong>.<\/p>\n\n\n\n