Argentina vs Cargill S.A., May 2022, Tax Court, Case No 27.026-I (A 19462)

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Cargill Argentine SA channelled 98% of its commodity exports through a branch in Uruguay. Cargill Argentine SA invoiced the exports to the branch, but shipped the goods directly to the customers. The prices charged by the branch to its customers could be the same, lower or higher than the price charged by Cargill Argentine SA to the branch, hence it would assume the price risks from the time of purchase from Cargill Argentine SA until the final sale to each customer.

Following an audit, the Argentine Revenue Service issued a transfer pricing assessment for FY 2000 to 2003. According to the tax authorities the pricing of the transactions between Cargill Argentine SA and the Branch in Uruguay had not been at arm’s length. Instead of pricing the commodities on the contract date, the tax authorities priced the transactions on the date of shipping – based on the so called sixth Method.

An appeal was filed by Cargill Argentine SA with the Tax Court.

Judgement of the Court

The Court set aside the assessment and decided in favor of Cargill Argentine SA. However in regards of an adjustment related to prices of soybean oil to Russia via the branch the assessment was partially upheld and referred back to the tax authorities for a reassessment.

The Court stated that the sixth method was not in force during the years in question. The method was first enacted by an amendment to the Argentine Income Tax Law in 2003.

“In view of the above observations and considering that they fit perfectly into the sixth method described above, we can affirm, on this occasion, that the Tax Authorities are attempting to apply extemporaneous legislation in a situation prior to the creation of the rule.”

The Court further noted that if the Argentine tax authorities maintained that the transactions should have been priced at the date of shipment, they should have adjusted Cargill Argentine SA’s export prices to that date in all the transactions and not just those where there was an upward price adjustment.

In regards of the russian transaction the court notes: “That in the third adjustment -inherent to the year 2002- the conflict is related to two exports of soybean oil to Russia, which were originally to be carried out through its Branch in Uruguay and Cargill Internacional S.A., but subsequently, at the request of the client, the goods were invoiced directly to the latter by CRA.

Within the framework of the aforementioned transaction, CROU also issued the sales invoices to Cargill Internacional S.A., and to cancel them it used the re-invoicing method of Cargill Internacional S.A. to CROU. These two operations, according to the observations made, were carried out for different values, the sale of CROU being of a lower value than the repurchase, thus generating a negative result which is not based on a real operation.

From the reading of the appeal, it does not appear that the plaintiff has offered any evidence tending to demonstrate a contrary situation, or justified through dialectics the differences detected, therefore, its statements are presented as mere dogmatic assertions lacking of virtuality to undermine the validity of the tax action; therefore, I vote to confirm the present adjustment, plus its interests.


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