Compliance with the Profit Test in Intragroup Services

April 25, 2024

Due to globalization, a multinational group manages increasing transactions among its member companies to optimize the performance of their business activities. In this regard, intragroup services, as defined in the Organization for Economic Cooperation and Development (OECD) Guidelines, are usually those technical, administrative, commercial, etc. activities a company, which does not belong to an economic group, would have been willing to pay for or would have performed independently. 

Thus, an intragroup service must provide economic or commercial value for the recipient entity. Therefore, a company should be assessed whether, in comparable circumstances, it would have been willing to pay an independent supplier for the same service or perform the activity on its own account. 

If a company would have covered the need by performing the activity directly or contracting a third party, it is an intra-group service. 

Although this scenario is usual within the practice of economic groups, it is still a challenge for the Tax Administrations. Thus, as a precaution for tax collection and a complement to the Transfer Pricing regime, from the fiscal year 2017, the Profit Test became mandatory. 

Legislation in Force

According to the provisions of Legislative Decree No. 1312, published on December 31, 2016, which amended Article 32-A of the Income Tax Law, and Legislative Decree No. 1369, published on August 02, 2018, requirements are established for the deductibility of expenses for intra-group services, for Income Tax purposes. 

In order to comply with the Profit Test, the taxpayer must support that the services received from related parties comply with three fundamental principles:  

  • Reliability: Documentation and information supporting the effective rendering of the service (contract, invoice, mail, reports, and minutes of meetings, among other documentation supporting the effective rendering of the service). 
  • Causality: Justification for rendering the service and support for the profits obtained. 
  • Reasonableness: Allocation of costs, expenses, and margin according to the classification of the service. Based on OECD Guidelines, services may be classified as high or low value-added. In the case of low-value services, the margin applied to costs and expenses should not exceed 5%. 

If the required support is not available, the expense will not be deductible, which is repaired by the SUNAT. 


To date, the Profit Test obligation does not have a reporting schedule as the other Transfer Pricing obligations. Conversely, in a tax audit process, the SUNAT can request documentation and information supporting the deductibility of expenses for intra-group services. 

Tax Audit

Currently, more recurrent tax audits focus on verifying whether the expenses for services received from related parties comply with the Profit Test every time SUNAT refers to the transactions reported in the Informative Affidavit – Local Report. 

In this regard, the reasonable criteria for the allocation of costs and expenses should be considered before rendering services among related parties, in addition to keeping documentation supporting the economic or commercial value obtained, as well as evidence of the effective rendering of the service, which should not be limited to a contract or invoice issued among the parties. Likewise, a defense file should be prepared with all the documentation related to intra-group services for any eventual tax audit.  


According to our experience as a specialized Transfer Pricing firm, companies usually do not have evidence available to prove the Profit Test principles due to the lack of a supporting report on their intra-group services. 

Consequently, based on the information of the Tax Administration to initiate a tax audit process, the Profit Test report must be duly supported, according to the current legislation and OECD Guidelines, to avoid the assessment of expenses for services among related parties, which can significantly affect the results of the business.