A former assistant treasury secretary for tax policy with the US Treasury Department, Michael Mundaca now serves as Ernst & Young’s (EY) co-director of the Americas Tax Center and National Tax Department. In those roles, Michael Mundaca provides client-driven services that focus on US and international taxation rules and developments.
A recent EY Global Tax Alert drew focus to Nicaraguan transfer pricing rules, which went into effect in late June 2017. Enacted as law by the Nicaraguan Congress in 2012, the rules were intended to go into effect four years later (entry into force was later delayed an additional year).
Transfer pricing comes into play when company divisions transact with one another and are measured and treated as entities that are independently run. The newly implemented Nicaraguan rules require the preparation of transfer pricing documentation each year and incorporate the arm’s-length principle. They also set forth transfer pricing methods employed when applying the arm’s-length principle, as well as criteria that taxpayers must adhere to when undertaking a comparability analysis.