The CIAT Executive Secretariat invites you to download and read section “3.16. Deduction of Costs, Expenses and Losses for Artificial Activities and/or Activities That Do Not Create Value”, written by José Troya.

This section addresses the deduction of costs, expenses, and losses in harmful international tax planning schemes, identifying artificial operations without economic substance that unduly reduce the tax base. It analyzes expenses whose form and essence differ, as well as those lacking economic substance, highlighting the importance of the benefit test, the economic substance of the provider, and proper documentation. The OECD Transfer Pricing Guidelines provide key criteria for assessing these operations, especially in transactions involving intangibles, recommending control mechanisms and regulations to mitigate these risks.

This is the 38th section published within the framework of the “Manual on the Control of International Tax Planning” and is available in English and Spanish. The complete Manual consists of six chapters composed of 42 sections. New sections will be published soon.