Peruvian Tax Authority challenges deduction of intercompany charges

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EY Global
21 Dec 2021
Subject Tax Alert
Categories Corporate Tax Transfer Pricing
Jurisdictions Peru

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The Peruvian Tax Authority is denying deductions for intercompany charges when the Peruvian entity is unable to provide supporting documentation for the costs and expenses incurred by the related party that rendered the services for the Peruvian entity.

In recent tax audits, the Peruvian Tax Authority has challenged the deductibility of intercompany charges.

Background

Legislative Decree 1312, in force since 1 January 2017, amended the Peruvian Income Tax Law by incorporating the following requirements for deducting intercompany charges paid to related parties for corporate income tax purposes:

  1. The intercompany charges must pass the so-called benefit test, meaning the service rendered to the taxpayer by its related parties has an economic or commercial value that is the same as if independent parties rendered the service to the taxpayer and the service enhances or maintains the taxpayer’s position in the marketplace.
  2. The taxpayer has supporting documentation proving the nature of the service, the need for the service, and the costs and expenses incurred by the related party that rendered the service.
New audits carried out by the Peruvian Tax Authority

The Peruvian Tax Authority is challenging the deductibility of intercompany charges if the Peruvian taxpayer (user of the service) does not provide supporting documentation for the costs and expenses incurred by the related party that provided the service. In some cases, the Tax Authority denied the deduction when the Peruvian entity was unable to provide the documentation.

 

For additional information with respect to this Alert, please contact the following:

Ernst & Young Asesores S.C.R.L, Lima
  • Roberto Cores
  • Ramón Bueno-Tizón
  • Ingrid Zevallos
Ernst & Young LLP (United States), Latin American Business Center, New York
  • Lucas Moreno
  • Ana Mingramm
  • Pablo Wejcman
  • Enrique Perez Grovas
Ernst & Young Abogados, Latin America Business Center, Madrid
  • Jaime Vargas
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
  • Lourdes Libreros
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
  • Raul Moreno, Tokyo
  • Luis Coronado, Singapore


For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.