Taxing authority and tax law
Tax authority: Superintendencia Nacional de Administración Tributaria (SUNAT)
Tax law: Article 32, Items 4 and 32-A of the Peruvian Income Tax Law (PITL)
Relevant regulations and rulings
Transfer pricing regulations were in force as of 1 January 2001 (Article 32 of PITL). Subsequently, Legislative Decree 945 and Legislative Decree 953 introduced transfer pricing amendments into the PITL and tax code, which were in force as of fiscal year 2004. The regulations are detailed in Article 24 and Chapter XIX (Articles 108 to 119) of the Peruvian Income Tax Regulations.
The transfer pricing rules will be applicable solely when the valuation agreed by the parties determines an income tax lower than the one it would have been calculated if the market value would have been considered. To this effect, the Regulations consider that a lower income tax is also determined when: i) the deferral of income is detected, or ii) the calculation of higher tax losses than the ones that would have corresponded.
In addition, the transfer pricing rules apply both to cross-border and domestic transactions between related parties. Moreover, all transactions with tax haven residents are considered to be with related parties. Thus, they are subject to the transfer pricing regulations.
In the case of domestic transactions, the transfer pricing rules must be considered not only for income tax purposes but also for VAT and excise tax.
OECD guidelines treatment
The PITL refers to the OECD guidelines as a source of interpretation for transfer pricing analysis as long as they do not contradict the PITL.
Priorities/pricing methods
Peruvian law implicitly adopts a best-method rule. Under Peruvian legislation, the transfer pricing methods identified are CUP, Resale Price, Cost Plus, Profit Split, the Residual Profit Split and Transactional Net Margin Method.
Transfer pricing penalties
Non-compliance with the obligation to present a transfer pricing technical study, or documentation and information supporting the calculation of the prices agreed on in transactions with related parties, is penalized with a fine of 0.6% of the company’s net income of the year before that under scrutiny. The penalty cannot be less than 10% of a Tax Unit, nor more than 25 Tax Units (one Tax Unit is equivalent to approximately US$1,300).
Likewise, non-compliance with the obligation to file the transfer pricing return according to the dates established by SUNAT is subject to a fine of 0.6% of the company’s net income of the year before that under scrutiny. The penalty cannot be less than 10% of a Tax Unit nor more than 25 Tax Units.
The adjustments to annual taxable income resulting from the tax authority’s application of the transfer pricing provisions will be subject to additional penalties that may be up to 50% of the resulting tax deficiency (income misstatement penalties).
Penalty relief
The penalty reductions that a taxpayer can be subject to for not complying with the obligations of having a transfer pricing technical study or presenting the transfer pricing informative return are the following:
- 80% penalty reduction if the taxpayer rectifies the infraction and pays the corresponding fine within the time established by SUNAT
- 50% penalty reduction if the taxpayer rectifies the infraction but does not pay the corresponding fine within the time established by the SUNAT
- 100% penalty reduction if the taxpayer files the transfer pricing informative return after the due date but before it is detected and compelled to do so by SUNAT
Documentation requirements
Since 2006, taxpayers are compelled to keep a transfer pricing study if they fall within the scope of the transfer pricing rules contained in Article 32-A of the PITL and if they meet any of the following conditions:
- The company’s income exceeds PEN6m and the amount of its intercompany transactions exceeds PEN1m.
- The company has been engaged in transactions from, to or through a low-tax jurisdiction.
Documentation deadlines
There is no deadline to present the transfer pricing study to the tax authority. Nevertheless, as provided in Resolution N°167-2006-SUNAT, the tax authority can request a transfer pricing study from taxpayers once the fiscal year is closed.
According to the tax regulations published in 2010, the deadline for filing the transfer pricing return for the fiscal year 2010 onward is in June of the year that follows the year of the corresponding transfer pricing return.
Statute of limitations on transfer pricing assessments
According to Articles 87-7 and 43 of the Peruvian Tax Code, the statute of limitations on income tax assessments is four years after
1 January of the year that follows the year the annual income tax return is due (generally, 31 March) and six years for returns that were never filed.
Return disclosures/related-party disclosures
The main aspects to be disclosed in the transfer pricing information return are the amount of the transactions, the transfer pricing method selected, the related party with which the transactions were made and the amount of the adjustments, among others.
Audit risk/transfer pricing scrutiny
The risk of transfer pricing issues being reviewed during a tax audit is moderate. The Peruvian Tax Administration has already initiated tax audits regarding transfer pricing issues. Nevertheless, not many taxpayers are being audited. It is expected that SUNAT will increase its audit reviews in the years to come.
APA opportunity
APAs are available for cross-border transactions only.
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