Market overview

Transfer pricing is increasingly important in Peru as the country is looking to become a member of the OECD by 2021. In order to facilitate this, the government has incorporated some key provisions of the OECD's BEPS recommendations into domestic law.

The country is taking "gradual steps to implement the BEPS guidelines on a yearly basis," said Renato Vila, advisory partner at PKF Vila Naranjo.

On December 31 2016, in accordance with BEPS Action 13, Peru issued Legislative Decree 1312. The decree significantly amended the Peruvian Income Tax Law by expanding transfer pricing reporting requirements with the master file, local file and country-by-country reporting (CbCR). "As of 2017, companies must submit a local file to the Peruvian Tax Administration. CbC reports and the submission of the master file will be made obligatory from 2018," said Vila.

More information will now be widely available to the Peruvian Tax Administration (SUNAT). "These reports will certainly increase [the number of] tax audits, given the automatic exchange of information between tax administrations of different countries to be progressively implemented by Peru. Changes have been introduced in our Tax Code with such purpose," said Carlos Chirinos, tax & legal manager at Grant Thornton.

However, Chirinos expects that CbCR will have a limited impact in the market since the "request applies only to Peruvian companies with subsidiaries outside Peru that have a high level of income". He estimates that no more than 30 companies are likely to be affected by this requirement.

The decree also introduced a new rule on deductible intra-group service charges. Under the new rules companies are required to perform a benefit test.

"By applying the benefit test SUNAT requires taxpayers to demonstrate that the service provided by the related party is useful and it generates an economic or commercial value," said Walther Belaunde Plenge, head of tax at Santivañez Abogados.

"Although the benefit test provides greater scrutiny of intra-group services to prevent profit shifting, the measure grants greater powers to SUNAT to decide when an intra-group service can be deducted as an expense or cost," said Gustavo Macedo, partner and founder of Navigo Asesores.

Furthermore, the decree revised the 'sixth method' which determines the market value of commodities. The sixth method now provides that the market value of commodities should be determined using the comparable uncontrolled price (CUP). "Under this method, the market value will be determined on the basis of international market quotations. For this purpose, the quotation period will be fixed on the date of loading for exports and unloading for imports – this moves away from the international trend," said Chirinos.

This revision is more aligned to Actions 8-10 of the BEPS project. However, Belaunde and Macedo argue that "the scope and application could be simpler [as] the new legislation has not considered other BEPS recommendations such as the possibility to use internal or external CUP comparables or the possibility to demonstrate that the quotation date is supported by contracts".

"The new quotation-date fixed rule is opposed to the arm's-length standard. Despite the parties performing their commodity transaction at arm's-length, tax adjustments could be levied when applying the new sixth method," Belaunde added. "This could have a huge impact, especially in the mining industry." Further guidance on the application of this method is expected with the publication of the income tax regulation.

Tax authorities

Superintendencia Nacional de Aduanas y de Administración Tributaria
Av. Garcilaso de la Vega 1472, Lima
Tel: +51 1 315 0730; +51 1 634 3300; +51 1 634 3600

Ministry of Economic and Finance
Jr. Junín 319, Cercado de Lima, Lima
Tel: +51 1 311 5930

Tax rates at a glance

(As of July 2017)

Corporate income tax 29.5%
Capital gains 29.5% (taxed at the normal corporate rate)
Branch tax rates 29.5% 5%
Withholding tax
Dividends 5%
Interest 4.99%/30%
Royalties from patents 30%
Technical services 15%
Digital services 30%
Branch remittance tax 5%

Source: PwC and Deloitte