Cassation Ruling No. 20299-2025 Lima, issued on October 29, 2025, by the Fifth Transitory Constitutional and Social Law Chamber of the Supreme Court of Justice of the Republic, addresses a question of high practical impact in transfer pricing: what happens to an adjustment by the National Superintendency of Customs and Tax Administration (SUNAT) when its comparability analysis omits elements required by law? The case concerns funds that a non-resident parent company transferred to its Peruvian branch interest-free, and shows why a technical Transfer Pricing study on intragroup financing must stand on its own, without relying on the Tax Administration’s errors.
In its grounds, the Supreme Chamber held that, faced with a defective comparability analysis, the Tax Tribunal should have declared the notice of tax assessment (resolución de determinación) null and void and ordered the reinstatement of the proceedings, rather than setting aside the valuation. The difference is not a formal one: with revocation, the tax adjustment (reparo) disappears; with nullity, the proceedings are restored to the corresponding stage so that SUNAT may issue a new notice of tax assessment in accordance with the law.
What were the facts of the case?
The transaction involved PVEP Perenco Perú Limited (Bahamas), a non-domiciled parent company, and its branch in Peru. The parent company transferred funds to the branch, and the trial court ruling classified the transfer not as a capital contribution but as a 0% interest loan.
Following a partial audit of the 2014 fiscal year, SUNAT applied Transfer Pricing rules to that interest-free loan. The assessment focused on the withholding of income tax for non-residents for the period of December 2014 and was set forth in Determination Resolution No. 012-003-0086647. According to the trial judgment, the appropriate method for determining the market value was the Comparable Uncontrolled Price Method.
What was the Tax Court’s ruling?
In Tax Court Resolution (RTF, by its Spanish acronym) No. 05562-1-2021, dated June 25, 2021, the Tax Court overturned the regional tax office’s decision and set aside the assessment decision. The reason was that SUNAT failed to consider the debtor’s creditworthiness or risk rating when analyzing the comparability of the loan.
Both of these elements are provided for in subsection (d) of Article 32-A of the Income Tax Law (LIR, by its Spanish acronym) and in subsection (a) of paragraph 1 of Article 110 of its Regulations, which list the comparability factors applicable to loans.
SUNAT filed a petition to declare that RTF null and void in October 2021. According to the text of the cassation appeal, the petition was upheld at the trial court level, and the Sixth Specialized Chamber affirmed that decision on May 30, 2025. Both the Tax Court and the branch filed a cassation appeal.
Why does the Supreme Court refer to “nullity” rather than “revocation”?
The Supreme Court noted that setting aside the assessment was not in accordance with applicable law. In its view, the Tax Court should have declared the assessment decision null and void, reinstated the proceedings, and ordered that a new assessment decision be issued in accordance with the law.
This reasoning is based on Article 109(2) of the Tax Code, which governs the nullity of acts by the Tax Administration. The Chamber held that it was appropriate to restart the proceedings to correct the defect in the comparability analysis. In other words, the omission affects how the market value was quantified, not the existence of the loan that gave rise to the objection.
This distinction has concrete consequences. If this criterion is applied in similar cases, a technical defect in SUNAT’s analysis would not resolve the dispute in favor of the taxpayer but would instead open the possibility of a new assessment. The cassation ruling does not indicate that this constitutes a binding precedent. Therefore, its general scope will depend on how the Tax Court and other courts apply it.
What does this mean for intra-group financing in Peru?
The case confirms that the debtor’s solvency and credit rating are not mere details. They are comparability factors expressly provided for in Peruvian regulations, and both the tax authorities and the taxpayer must be able to substantiate them.
This aligns with the approach set forth in Chapter X of the Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines, which addresses financial transactions and assigns a central role to the borrower’s creditworthiness when determining an arm’s-length interest rate.
For groups with loans between related parties, the practical implication is clear. The cassation ruling does not establish that an interest-free loan is, in and of itself, contrary to the arm’s-length principle; the central point is that the agreed-upon rate must be supported by a comprehensive and technically sound comparability analysis. If the defense of a 0% or low-interest-rate loan relies solely on deficiencies in SUNAT’s analysis, the reasoning in this ruling suggests that such a defense could lead to a new tax assessment rather than the setting aside of the adjustment. The strongest position remains having one’s own contemporaneous benchmark for the borrowing entity’s credit rating and the agreed-upon interest rate.
At TPC Group, in every analysis of intra-group financing in Peru, we evaluate the borrowing entity’s solvency and risk rating along with the other comparability elements required by Article 32-A of the LIR and Article 110 of its Regulations. Our objective is to substantiate a fully competitive interest rate that is technically defensible in the event of a potential new determination by SUNAT.