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In Peru, transfer pricing regulations were incorporated into the Income Tax Law, in numeral 4 of article 32° and article 32°-A, in force from the year 2004. Likewise, Article 108 of the LIR Regulation incorporates specifications to article 32°-A, effective as of January 1, 2006. Transfer pricing rules directly affect related companies, as long as they have carried out transactions with each other.
The regulations also affect taxpayers who carry out operations from, through or to countries or territories with low or no taxation (also called 'tax havens').
In accordance with Legislative Decree 1312 of December 2016, it was modified the LIR in relation to the Informative Transfer Price Affidavit that taxpayers must submit to SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria, in Spanish) and was classified into three levels of obligation: Local File, Master File and Country by Country Report.
According to Article 32-A, subsection h) of the Income Tax Law, the OECD Transfer Pricing Guidelines (TPG) are used as source of interpretation, as long as they do not oppose to the provisions approved by that law.
Transfer pricing methods
According to Article 32-A, subsection e), the prices of transactions subject to the scope of this article shall be determined in accordance with the internationally accepted methods established in this law, for which purpose it should be considered to be the most appropriate to reflect the economic reality of the transaction.
(1) Comparable uncontrolled price method (CUP); (2) Resale price method; (3) Cost plus method; (4) Profit method; (5) Residual Profit Split Method; (6) Transactional Net Margin Method (TNMM). The last is used exceptionally if none of the referred methods can be applied due to the nature and characteristics of the activities and transactions, other methods may be applied, in accordance with the provisions of the regulations.
Transfer pricing documentation
Preparation of transfer pricing documentation
In Peru there are three types of TP documentation: (i) Local File, (ii) Master File and (iv) Country by Country Report.
Master and local file
Local File is an obligation for taxpayers that accrued income exceeds 2,300 Tax Units (TU) or UIT (Unidad Impositiva Tributaria) in Spanish, approximately 3 million of US Dollar. Also, taxpayers with transactions subject to the transfer pricing rules between 100 and 400 Tax Units (Section I) and transactions subject to the transfer pricing rules are more than 400 Tax Units ( Section II).Note that 1 TU currently is USD 1,320 approximately but it is slightly adjusted each tax year. Important Notice: Since 2017, Tax Law prescribes, as a necessary condition for the deduction of the expense corresponding to the services received by taxpayers from their related parties or those carry out from and to/through countries or territories with low or no taxation, the compliance of the Benefit Test, as well as the presentation of the required information that evidences the effective provision of the service, its nature, necessity, costs and expenses incurred and the reasonable criteria for assigning these.
Master File is an obligation for taxpayers that belong to an Economic Group. Additionally, accrued income of the taxpayer in fiscal year must be greater than 20,000 Tax Units (TU), approximately 26.4 million of US Dollar. Also, they would have made transactions with related parties and/or tax havens (off shores), whose amount of operations is equal to or greater than 400 TU, which is approximately to USD 525,000 US Dollar.
CbC Report is an obligation to taxpayers who belong to a multinational economic group and the income accrued from the consolidated financial statements of the multinational group in the previous fiscal year is greater than USD 730 MM. Additionally, the applicability depends on the international agreements between Tax Authorities regarding to share of the tax documentation.
According to numerals 2, 4 and 8 of Article 176 of the Peruvian Tax Code, it is a punishable offense:
(2) Not to submit informative affidavit within the established deadlines. The penalty is a fine equivalent to 0.6% of net income. (4) Submit the informative affidavit incomplete or with nonconforming information. The penalty is a fine equivalent to 0.6% of net income. (8) Failure to file the informative affidavit without taking under consideration the guidelines and terms establish by SUNAT. It is punishable with a fine equivalent to 30% of a UIT.
Also, numeral 27 of Article 177 of the Tax Code establishes that failure to show or to file the documentation and information referred to in subsection g) of Article 32-A of the Income Tax Law; which, among others, support the informative affidavits Local File, Master File and/or Country-by-Country Report, is a punishable offense with a fine equivalent to 0.6% of the net income, which cannot be less than 10% of a UIT or more than 25 UIT.
Economic analysis and how to demonstrate an arm’s length result
The market value for transactions between related parties or made from, to or through countries or non-cooperative jurisdictions or with low or zero taxation o, shall be the prices and amount that would have been agreed with or between independent parties in comparable transactions, under the same or similar conditions.
Advance Pricing Agreements (APAs), dispute avoidance and resolution
Peruvian legal framework only establishes the possibility of entering into unilateral APAs with domiciled taxpayers, since Peru has not implemented bilateral or multilateral APA programs to date. Also, to date, no such agreement has been signed in Peru.
According to the thresholds established in the Superintendence Resolution N° 014-2018/SUNAT, taxpayers whose accrued income does not exceed 2 300 Tax Units and transactions subject to the transfer pricing rules are below 100 Tax Units are exempted.
In face of the effect of COVID-19, the tax administration suggested compare the year the financial information of the tested party against the financial information of comparable companies from the same fiscal year.
For further information on transfer pricing in Peru please contact: