Peru
Abigail Alayo
by Abigail Alayo
The OECD Transfer Pricing Guidelines have become a fundamental reference for many countries in designing their tax regulations in this field. In Peru, the adoption of these guidelines represents an effort to align with international standards and ensure transparency and fairness in transactions between related companies. The National Superintendence of Customs and Tax Administration (SUNAT) is the entity responsible for implementing and overseeing these regulations.
The adoption of the OECD Transfer Pricing Guidelines in Peru has had several significant implications. While it is true that this adoption strengthens Peru's position in the international community by demonstrating its commitment to best practices in tax matters and its willingness to prevent erosion of the tax base and profit shifting, it has also allowed tax authorities in Peru to establish more effective mechanisms to detect and prevent transfer pricing practices that do not comply with market conditions. This has led to increased rigor in audits and reviews of transactions between related companies.
In recent years, transfer pricing (TP) has become an increasing focus in Peru. Regulations have been implemented gradually, year after year, with several information affidavits currently in effect, which apply to taxpayers subject to the TP regime; these include the local report, master file, and country-by-country report (CbCR). In addition, there has been an increase in transfer pricing adjustments in related-party transactions during the auditing process.
Transfer pricing obligations are regulated under the provisions of Legislative Decree No. 1312 and Superintendency Resolution No. 163-2018/SUNAT. According to these provisions, binding conditions have been established for filing the local report, the master file, and the CbCR under the current TP regime. The criteria to be considered by taxpayers to determine their obligation in each fiscal year are detailed below.
Taxpayers are obliged to file the Information Affidavit – Local Report, which is divided into two sections, to be completed as follow:
Section I:
When the accrued income has exceeded PEN 11.385 million (i.e. 2,300 tax units[1]) in the previous fiscal year and the taxpayer has had transactions within the application scope of transfer pricing for an amount equal to or greater than PEN 495,000 (100 tax units) and less than PEN 1.98 million (400 tax units).
Section II:
When the accrued income has exceeded PEN 11.385 million (2,300 tax units) in the previous fiscal year and the taxpayer has had transactions within the application scope of transfer pricing for an amount equal to or greater than PEN 1.98 million (400 tax units).
The Information Affidavit – Master File must be filed by taxpayers and members of multinational groups (as defined by the income tax law regulations) who meet the following conditions:
Whose accrued income has exceeded PEN 99 million (20,000 tax units).
Having carried out transactions within the application scope of the transfer pricing rules, where the value of transactions is equal to or greater than PEN 1.98 million (400 tax units).
Taxpayers who form part of a multinational group with a consolidated income of PEN 2.7 billion or more for the year under analysis must file a statement for the following parties:
The parent company of the multinational group, domiciled in the country.
The taxpayer domiciled in the country belonging to the multinational group when, even the parent company is not domiciled in Peru, any of the following situations are verified:
The taxpayer would have been appointed by the group as the parent company representative.
One or more of the conditions set forth in paragraphs 1 to 3 of subsection b) of Article 116 of the Income Tax Law Regulations are met.
If there are several taxpayers in the group that are domiciled in the country, the person in charge of filing the statement will be the one designated by the group.
It should be noted that the taxpayer obliged to file the statement must communicate their appointment to the Peruvian government tax administration (SUNAT) by the last working day of the month prior to the reporting month. If the filing is not submitted, all member taxpayers of the multinational group domiciled in the country will be considered responsible.
Likewise, the taxpayer listed in one or more of the conditions set forth in paragraphs 1 to 3 of subsection b) of Article 116 of the Income Tax Law regulations will be exempt from filing the CbCR if, on or before the due date for its filing, the multinational group files the statement through a parent company representative domiciled or resident in another jurisdiction, according to the provisions of the penultimate paragraph of the aforementioned subsection.
Therefore, the taxpayer domiciled in the country must communicate to SUNAT the designation of the parent representative domiciled or resident in another jurisdiction through a written document signed by their legal representative, attaching a simple copy of the communication filed by the parent representative in the jurisdiction of its domicile or residence. The communication must be filed at the office in charge of receiving their paid statements until the expiration of the deadline for filing the statement.
Finally, subsection i) of Article 32-A of the Income Tax Law establishes that the services received by the taxpayer from related parties must comply with the “profit test” for the deduction of costs and expenses to determine Income Tax.
In order to comply with the profit test, the following must be evaluated, verified, and adequately supported:
The rendered service effectively provide economic and/or commercial value for the taxpayer;
The services under analysis qualify as high or low added value;
The profit margin of low value-added services does not exceed 5%.
Documentation and supporting information evidencing the effective rendering, nature, and necessity of the services; the costs and expenses incurred by the provider; and the profit margin.
The Peru tax administration is increasingly focused on the issue of transfer pricing, and has increased the number of audits carried out in this area. It is critical to stay up informed about current and updated regulations, and to have a good consultant to ensure proper compliance with TP filing obligations.
The penalties for non-compliance with the filing of informational sworn statements are established in sections 2 and 4 of article 176 of the Tax Code of Peru.
If they are not filed within the established deadlines or are submitted incompletely, the penalty will amount to 0.6% of net income, with a cap of 25 UIT (Tax Units). The taxpayer can opt for the gradual compliance regime when an error occurred while submitting any of these reports, upon rectifying the error.
Since 2004, the Income Tax Law (IR) establishes the possibility for taxpayers to enter into an Advanced Price Agreement (APA) with SUNAT, which stands for 'Acuerdo Anticipado de Precios de Transferencia' in Spanish. In general terms, the APA aims to reduce disputes in transfer pricing matters; however, in Peru, no APA has been concluded to date.
The complexity and high cost of preparing the proposal, the excessive timelines for its evaluation, and the need to provide sensitive information about the involved parties, all contribute to making potential applicants think twice before deciding to propose an APA to SUNAT.
[1] For the fiscal year 2023, PEN 4,950.
Abigail Alayo is a Tax & Legal Partner with VAG Global. She's a Certified Public Accountant and Administrator graduated from the Universidad Peruana de Ciencias Aplicadas with Postgraduate in Corporate Finance, Tax Law, Business Taxation and Postgraduate Specialised in Prices of Transfer by CIAT. Experience of more than 10 years in the area of accounting, taxation and legal.
Contact Abigail.
Vargas Alencastre, García & Asoc. S.C.R.L. - Auditores y Consultores is a multidisciplinary organisation employing more than 80 professionals. They are more than 25 years in the market offering auditing, tax, business consulting, and transfer pricing study services.
GGI member firm Vargas Alencastre, García & Asoc. S.C.R.L. - Auditores y ConsultoresLima, PeruT: +511 627 9787
Auditing & Accounting, Tax, Advisory
