Transfer Pricing in Peru
Transfer pricing rules in Peru were introduced to the Income Tax Law, approved by Legislative Decree No. 744, more than 15 years ago.
However, a reform was introduced in 2017 by Legislative Decree No. 1312 regarding the rules on the matter.
This decree, among other provisions, establishes new Informative Affidavits, such as the Local File, Master File and Country by Country Report (CbC Report), in line with the supporting documentation indicated in Action 13 of the BEPS Plan (Base and Erosion and Profit Shifting) issued by the Organization for Economic Cooperation and Development (OECD).
Such statements were additionally regulated by Superintendency Resolutions N°163-2018/SUNAT and N°014-2018/SUNAT.
Transfer Pricing Definition
They are defined as agreed prices or values in transactions among related parties. Such transactions are also called Intercompany Transactions.
The governing principle that rules the written above is that of full competition or arm’s length, which watches over the agreed prices among the related parties are according to the market value. It means the agreement among the independent parties.
Pricing Transfer Application Scope in Peru
According to Article 108 of the Regulations of the Law, the operations subject to the Peruvian system will be the following:
- The elaborated ones between a taxpayer in the country and his Related Parties.
- The transactions elaborated between a taxpayer resident in Peru and taxpayers domiciled in non-cooperative countries or lands with low or zero taxation.
- Operations elaborated with parties whose income from such transactions is subject to a preferential tax regime.
Related Parties Definition in Peru
The Article 32-A, paragraph b), in accordance with Article 24 of the Regulations of the Law, indicates the cases in which the linkage will be understood to be established. Therefore, the following shall be considered as related parties:
- A person, either natural or legal, owns more than 30% of the capital of another company.
- The same person, whether natural or legal, owns more than 30% of the capital of two or more legal entities, either directly or indirectly.
- When the indicated proportion pointed above belongs to spouses or to individuals, whose relationship is up to the second degree of consanguinity or affinity.
- The capital of two or more legal entities belongs to common partners in more than 30%.
- Companies or entities have directors, managers, administrators or other executives in common.
- Two or more legal entities consolidate their financial statements.
- The contracting parties with the business collaboration contract with independent accounting, when own more than 30% of the contract’s assets or when one of the parties has the power of decision.
- The associate in a joint venture contract, when it has more than 30% in the results or profits of the business.
- The permanent establishments in the country in relation to its parent company abroad along their linkage.
- The company domiciled in Peru in relation to its permanent establishments abroad will also be linked.
- The legal or natural person who can exercise dominant influence in the decisions of the administrative bodies of one or more legal persons or entities. It shall be understood that such influence is exercised when in the adoption of an agreement it exercises or controls an absolute majority.
- Related parties will be considered when a legal person or entity resident in the country makes 80% of its sales, rendering of services or other services with another person, company or entity, provided that for the latter it represents at least 30% of its purchases.
Once the linkage is established, it will be in force from that moment until the end of the taxable year. If the linkage is configured by dominant influence, it will be in force from the adoption of the agreement until the closing of the fiscal year, and in the case of linkage by percentage of sales, it will be in force for the following fiscal year.
Transfer Pricing Methods in Peru
In accordance with Article 32-A, paragraph e) of the Law, the following methods shall be used to determine whether the prices agreed between related parties are at market value:
- Non-Controlled Comparable Price Method.
- Resale Price Method.
- Increased Cost Method.
- Profit Sharing Method.
- Residual Profit Sharing Method.
- Net Transactional Margin Method.
- Other Methods.
It should be noted that in the particular case of the “other methods” the law indicates that they will be used in accordance with the provisions of the Regulations; however, the latter do not contain provisions in this regard, and therefore, they are not yet applicable.
Benefit Test in Peru
The transfer pricing legislation in Peru has incorporated in this matter a special provision, referring to the services received by the taxpayer from related parties, eiher and individual or a related company, also known as Intra-group Services.
Thus, paragraph i) of Article 32-A of the Income Tax Law states that without prejudice to the other provisions indicated in this law, services received from related parties may only be deducted to the extent that they comply with the Benefit Test.
The law stipulates it will be fulfilled when the service provides an economic or commercial value who receives it, maintaining or improving his or her position in the market, which occurs when independent parties would have satisfied this by themselves or through a third party.
The documentation related to the Benefit Test should provide information regarding the nature of the benefit, its needs, the costs and expenses of the service and the criteria for their allocation.
It should be likewise noted that the Intra-group Services may be of low added value.
According to this section of the standard, those that have the characteristics of an auxiliary activity, do not constitute the main activities of the taxpayer or the group, do not require the use of intangible assets and do not entail high risks for any of the parties.
Regarding these services, they should not margin more than 5% of the supplier’s costs and expenses.
Informative Affidavit of Transfer Pricing in Peru
Taxpayers subject to these rules were required, until 2015, to file an Informative Affidavit and a Technical Study, notwithstanding according to amended paragraph g) of Article 32-A of the Law, it is stated that taxpayers subject to the transfer pricing rules will be required to file up to three Informative Affidavits.
According to the first paragraph above quoted section, taxpayers who have carried out transactions with related parties and/or with subjects residing in non-cooperating or low or null tax countries or with preferential regimes and have earned income in that fiscal year for more than 2300 UIT are required to file such report.
In accordance likewise with article 2 of Superintendence Resolution N°014-2018/SUNAT, this report consists of four annexes, which will be completed by the taxpayer according to the amount of transactions subject to these valuation standards.
Thus, those taxpayers whose operations subject to the Transfer Pricing regime exceed 100 UIT up to the amount of 400 UIT will be required to file Annex I of the Local File.
In case of exceeding the 400 UIT, the taxpayer will be obliged to file the four annexes.
The Monthly Obligation Schedule will determinate the due date for its filing for the May period of the next year of the operations carried out, through Virtual Form 3560.
This report should contain the organizational structure of the economic group, business description, Transfer Pricing, policies, among other requirements.
Taxpayers who are members of a group whose income accrued in the taxable year is greater than 20,000 UIT will be obliged to pay this tax.
According to Article 116 of the Regulation, a group shall be understood as a group of persons, companies or entities that are linked by ownership or control, in such a way that they are obliged to consolidate their Financial Statements in accordance with accounting standards.
In turn, Article 2 of the Superintendence Resolution N°163-2018/SUNAT, adds as a requirement to the above quoted that the taxpayer has carried out operations within the scope of transfer pricing for an amount exceeding 400 UIT.
As for the filing deadline, it will be done according to the Monthly Obligation Schedule for the September period of the following year of the operations, through Virtual Form 3561.
Country by Country Report
This report will contain information about the income of each of the entities of the group, business activities, taxes paid, among others.
According to paragraph b) of article 116 of the Regulation, the parent company domiciled in the country of a Multinational Group shall be obliged, provided that its income for the taxable year prior to the one being reported is greater than S/. 2,700,000,000.00.
Likewise, numeral 10.1.2, of article 10, of the Superintendence Resolution N°163-2018/SUNAT, states that the taxpayer domiciled in the country, member of a Multinational Group whose income amounts to the amount already indicated, will also be required to file this report, provided that he/she is in any of the following assumptions:
- If the Parent Company designated him/her as its representative for this report.
- The non-domiciled parent is not required in its jurisdiction to file this report.
- When the jurisdiction of the parent company has an exchange agreement for this report, but not a competent authority agreement.
- When there is a Country-by-Country Report Exchange agreement and a competent authority agreement, and SUNAT becomes aware of any systematic non-compliance by any of the entities after having notified it.
Regarding this report, the deadline for filing it will be according to the schedule of obligations for the September period, which expire in October through Virtual Form No. 362.
Regarding the deadline at the same time, it should be noted that Superintendence Resolution N°0155-2020/SUNAT, published in September 2020, has extended the filing of such report for the reporting parties as indicated in assumptions b, c and d, until the last working business day of the month following when SUNAT publishes on its website page the approval of the confidentiality standard assessment and information security by the OECD.
The OECD Global Forum has currently already communicated to Peru the approval of the standard, nonetheless to date it has not been published on SUNAT’s website.
Transfer Pricing Documentation in Peru
Taxpayers must keep their transactions documentation with Related Parties for the purpose that they are required by the Tax Administration.
Fines for Non-Compliance with Transfer Pricing in Peru
The infractions due to the failure to file Informative Affidavits are established in paragraphs 2 and 4 of Article 176 of the Peruvian Tax Code.
If filing submit were not be within the established deadline or were incomplete, the penalty would amount to 0.6% of the net income with a maximum of 25 UIT.
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