Tax Obligations of Legal Entities That Enter Into Transactions with Related Parties
April 2, 2019
The Income Tax Law (LISR) establishes the tax charges to be met by taxpayers who have created this business link.
Today, the constant changes in the economy, globalization and business opportunities require companies to create permanent and strategic business relationships to remain competitive.
Sometimes, these business relationships originate with companies or agents other than the organization . A growing organization “segments” certain departments or areas of its administration, converting them into independent companies with the purpose of certain operations being carried out by that specific unit, thus reducing, among others, its administrative burden.
Due to the commercial or organizational relationships that these types of institutions develop, a business link called a related party is created , which is defined as follows by article 179 of the LISR :
Article 179.- … Two or more persons are considered to be related parties when one participates directly or indirectly in the administration, control or capital of the other, or when a person or group of persons participates directly or indirectly in the administration, control or capital of said persons. In the case of joint ventures, their members are considered as related parties, as well as the persons who, according to this paragraph, are considered related parties of said member.
Related parties of a permanent establishment, the parent company or other permanent establishments of the same, as well as the persons mentioned in the previous paragraph and its permanent establishments are considered … “
The LISR in its article 76, section XII, establishes the following:
Of the obligations of moral persons:
Article 76.- Taxpayers who obtain income from those indicated in this Title, in addition to the obligations established in other articles of this Law, shall have the following:
XII.- In the case of legal entities that enter into transactions with related parties, they must determine their cumulative income and their authorized deductions, considering for such operations the prices and amounts of consideration they would have used with or between independent parties in comparable operations. For these purposes, the methods established in article 180 of this Law shall apply, in the order established in said article “.
Therefore, there is an administrative burden here that we should not ignore, since as the law itself establishes, it is an obligation of the legal entities and consists of determining income and deductions subject to Income Tax (ISR) through the methods established in article 180 of the law and.
This obligation is fully complied with when carrying out the transfer pricing study , which is carried out by applying one of the following methods:
- Comparable price method not controlled
- Resale price method
- Added cost method
- Utility partitioning method
- Residual method of profit sharing
- Operating profit transactional margins method
Only this obligation is mentioned, as it is the only one that refers to related parties in a specific way, not as is the case with fractions IX and X of the same article 76 of the LISR, as these specify the obligation for “parties related abroad. “
In conclusion, in addition to complying with tax returns, the issuance of electronic invoice , among other tax obligations, we must take into account if we are dealing with a business relationship of related parties , if so, we would have an administrative burden more to fulfill.