Vicentín S.A.I.C. is an Argentine company that exported agricultural commodities during the 2001 and 2002 tax periods.
Following an audit, the tax authorities issued an assessment holding that Vicentín’s prices of commodity exports to independent customers, whether resident in countries with low or zero taxes or not, were lower than the official FOB index set by the Secretariat of Agriculture (SAGPyA), and that these prices should be adjusted to the index under Articles 8 and 15 of the Income Tax Law (LIG).
However, the National Tax Court revoked this decision, a ruling that was confirmed by the National Chamber of Appeals. Both courts accepted, based on an expert accounting report and market data, that Vicentín’s export prices to independent customers reflected normal market conditions between unrelated parties, and that these prices could serve as valid internal comparables, including for exports to customers in low- or zero-tax jurisdictions.
The tax authorities filed an extraordinary appeal where they argued that Vicentín should have compared their agreed prices with the wholesale price at the destination and used the higher figure. They also claimed that, in the absence of documentation on destination wholesale prices, they were entitled under Article 8(a) of the LIG to use wholesale prices at the point of origin, as defined by the official FOB index of the SAGPyA. For exports to customers in low- or zero-tax countries, the tax authorities claimed that prices agreed with other independent customers were not valid comparables because they did not meet the market test in Article 8.
Judgment
The Supreme Court declared the extraordinary appeal admissible, but upheld the original ruling in favour of Vicentín.
The Court held that Article 8(a) of the LIG establishes the sale price agreed between independent parties as the basis for calculating net Argentine source profits from exports. It also ruled that the use of wholesale prices at destination, or at origin if destination prices are unavailable, is an exceptional measure. This mechanism only applies when no price has been set, or when the agreed price is lower than the wholesale price at the destination, and the exporter has not proved that their prices reflect normal market conditions. The direct replacement of agreed prices with SAGPyA FOB indices by the tax authorities was therefore inconsistent with the statute.
Furthermore, the Court ruled that the SAGPyA FOB indices, which were created under Law 21,453 to serve as the basis for calculating export duties, had not been designated by the legislature as the ‘wholesale price at origin’ for income tax purposes. The principle of legality therefore prevented their use by analogy being extended.
Regarding exports to independent customers residing in low- or zero-tax countries, the Court confirmed that, under Article 15 LIG and its regulations, prices agreed with independent customers not residing in such jurisdictions could be used as internal comparables. As these prices had been accepted as market prices, and as the tax authorities had not demonstrated any arbitrariness in the lower courts’ evaluation of the evidence, Vicentín could use them to demonstrate that its exports to low- or zero-tax jurisdictions were also in line with normal market practices.
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