Tax Anti-Avoidance Rules in Latin America
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The LATAM countries are introducing anti-avoidance rules to follow the global trend of tackling tax avoidance: similarities and differences in the approach taken by different countries are considered here.
Latin American countries have historically approached tax reorganizations in a very formalistic way, with a form over substance criterion prevailing in solving tax controversies. These countries have been reluctant to include the General Anti-Abuse Rule (‘‘GAAR’’) into their legislation, allegedly as this would increase the taxpayer’s uncertainty over what qualifies as tax planning with regard to tax avoidance, consequently undermining potential new investment and economic growth.
However, such initial resistance has yielded before the global trend of tackling unacceptable aggressive tax planning by including the GAAR, and automatic exchange of information between tax administrations, among other measures.
This analysis provides a summary of the main topics identified in connection with the establishment
of tax anti-avoidance rules in Latin American countries, considering the situation in a representative group of countries such as Argentina, Brazil, Chile, Colombia, Mexico and Peru (the ‘‘LATAM countries’’).Generally speaking, there is no joint and binding approach for combating tax avoidance among the LATAM countries. Rather, each country deals locally and separately with this issue.
However, it is possible to find the following binding exceptions:
the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters, subscribed
to by more than 90 countries (including the majority of the G-20 economies), including all LATAM countries with the exception of Peru. The purpose of this Convention is to tackle cross-border tax avoidance, enabling co-operation between signing countries regarding the exchange of relevant information to facilitate the assessment and collection of all types of taxes (with the exception of custom duties).
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