Reybanano del Pacifico C.A. alleges infringement of the right to legal certainty (Art. 82 of the Constitution) since, in the contested judgment, the National Court indicated that the OECD guidelines should be used.
However, according to Reybanano del Pacifico C.A. the OECD Guidelines were not part of the Ecuadorian legal system in the tax year 2006, the year of the tax dispute. Therefore, they could not be considered as non-applied rules since they do not come, “[…] from any source contemplated in the Constitution […] to form part of the legal system in the 2006 tax year, in such a way that the normative certainty that protects the right to legal certainty has been violated”.
Judgment of the Court
The Constitutional Court dismissed the appeal of Reybanano del Pacifico C.A. and confirmed the validity and legitimacy of the decision issued by the National Court.
Excerpt in English
“34. In turn, the Chamber analysed the content of the OECD guidelines (1.37, 1.38 and 1.40) that it considered applicable to the legal problem raised and their application to the tax controversy in question. Thus, in the main, it states:
[…] Under the assumptions established in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, the Tax Authority is empowered to correct [sic] the aforementioned distortion, which is why in section 3.8.4.7 of the Challenged Determination, regarding the calculation of the transfer pricing adjustment […].
35. The Chamber, referring to OECD Guideline 1.40, determines that this provision is related to the factual background regarding the prices and terms used by the plaintiff in its comprehensive transfer pricing report, “[…] the same that are not in full competition, [which] allows, in coordination with the guidelines issued by the OECD, to establish that the Tax Administration was empowered to correct these distortions that affected the ROA index used […]”.
36. From the previous paragraphs, this Court considers that the Chamber explains the way in which the OECD guidelines are used in the specific case and the reasons for their application in this case. In addition, it can be seen that the arguments of the judgment are based on substantive and adjective rules, in relation to the appellant’s claim in consideration of the postulates of the right to legal certainty. In turn, this Court has already determined that the OECD guidelines are incorporated as part of domestic law by the effect of the RLRTI20 . Furthermore, it is verified that Art. 66.6 of the RLRTI, which refers to the OECD guidelines as a technical reference in transfer pricing, was published in the Registro Oficial Suplemento 494 of 31 December 2004, prior to the tax controversy.
37. A review of the contested judgment shows that the Chamber identified and applied the rules that it considered relevant for the purposes of resolving the case under analysis, and that there was no failure by the judicial authority to observe the legal system in a manner that would have led to an infringement of constitutional rights. In the opinion of this Court, the contested judgment did not affect the right of the plaintiff to have a predictable and clear legal system that would allow her to have a reasonable notion of the rules of the game that would be applied to her and that her legal situation would not be arbitrarily modified.
38. It is also clear from a review of the contested judgment that the Chamber stated the legal rules or principles on which it based its decision and explained their relevance to the factual background. In such a way that it applied the rules it considered relevant for the purposes of resolving the specific case, including the OECD guidelines, based on the reference made by the RLRTI (in force at the time of the dispute) to them, as a technical reference in transfer pricing matters. In such a way that there was no failure by the judicial authority to comply with the legal system that would have led to an infringement of constitutional rights. In turn, it is verified that the Chamber complied with the minimum standards of the right to due process in the guarantee of motivation determined in the Constitution. Nor does it appear that the Chamber established new facts or evidentiary assessments, but rather relied on the findings of the District Court in this regard. As such, the Chamber ruled within the framework of its powers and taking into account the rules in force that it considered applicable in order to reach its conclusion in the specific case. Therefore, this Court does not find that the right to legal certainty or the right to due process in the guarantee of motivation of the plaintiff has been violated.”
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