Juan Ignacio Cornejo, transfer pricing partner at KPMG in Chile, believes Tuesday’s announcement will provide greater clarity and certainty for taxpayers.

“The Chilean regulations are quite vague and leave extensive room for interpretation to the tax authorities. These amendments should aim to adopt the OECD guidelines on transfer pricing in a clearer way,” said Cornejo.

By becoming a member of the OECD, Chile will have to comply with the organisation’s standards for transfer pricing and establishing arm’s-length prices.

To comply with OECD guidelines, Cornejo believes the country’s regulations need to be more targeted in their approach.

He feels the country needs to be more precise with its definition of comparability criteria, methods of comparison, procedures for settling controversies and the criteria for determining the arm’s length range. He also believes there needs to be changes to the minimum documentation requirements.

“We believe these changes would involve a benefit for taxpayers since it would allow a clearer set of rules on transfer pricing. Having clearer regulations has become relevant due to an increase in audits and the attention the Chilean tax authorities have given to transfer pricing issues lately,” said Cornejo.

Chile will join the OECD on January 11 2010 after it signs the Accession Agreement in Santiago.

This news comes as the Chilean tax authorities have developed an audit program to detect differences in inter-company transactions of Chilean multinational corporations.

"We applaud Chile's announcement that it will more closely examine these inter-company transactions," said Global Financial Integrity director Raymond Baker. "50-60% of all global trade is between entities of the same corporation, and there is an acute need for more aggressive study of these transactions.