Royalties, Technical, Administrative And Consulting Services Paid To Related Parties

• Published date: 04 January 2023
• Subject Matter: Tax, Income Tax, Tax Authorities
• Law Firm: CorralRosales
• Author: Ms Andrea Moya

The Internal Revenue Service issued the Circular NAC-DGECCGC22-00000012 on December 19, 2022, to clarify the application over time of the deductibility limit applicable to expenses for royalties, technical, administrative, and consulting services paid to related parties (hereinafter the "Deductibility Limit").

1. Background

The President of the Republic issued the Executive Decree 304 published in the Second Supplement of the Official Gazette 608 of December 30, 2021, which contained the Regulations to the Law of Economic Development and Fiscal Sustainability after the COVID 19 Pandemic by means of. Said regulations eliminated the Deductibility Limit established in article 28 #16 of the Internal Tax Regime Law Regulations.
The President of the Republic issued the Executive Decree 586 published in the Third Supplement to Official Gazette 186 of November 10, 2022, which amended several regulations and incorporated once again the Deductibility Limit established in article 28 #16 of the Internal Tax Regime Law Regulations.

2. Consequences:

Considering the amendments detailed above, the Internal Revenue Service issued Circular NAC-DGECCGC22-00000012 whereby it clarifies:

1. Considering the amendments detailed above, the Internal Revenue Service issued Circular NAC-DGECCGC22-00000012 whereby it clarifies:
2. The advance pricing agreements that have been notified to the taxpayer and which approved an increase in the deductibility limit in force until December 31, 2021, will maintain its legal effects for the year 2022.
3. For the calculating the income taxable base for the fiscal year 2023 and subsequent years...