El Salvador joined other Central American nations, including the Dominican Republic and Aruba, in adapting transfer pricing rules that comply with the OECD guidelines. El Salvador implemented formal transfer pricing documentation requirement which incorporate the OECD’s five specified transfer pricing methods. With the implementation of these new regulations found in the “Guía de Orientación N° DG 001/2012,” local tax authorities aim to increase the efficacy of tax collection and to facilitate the auditing process.
The new regulations affect related party transactions and parties domiciled in tax havens. The tax regulations stipulate the documentation required by the local tax authorities and establish firm filing dates for annual transfer pricing reports. Taxpayers are recommended to file the informative return by the deadline of April 10, 2012 to avoid penalties. Transfer pricing documentation will need to be prepared by May 31, 2012.