1. Economic Effects and Investment Attraction
Despite various factors that affected the Peruvian economy in 2023, our country has strategic sectors such as mining, agribusiness, energy, and infrastructure, which attract foreign investment. According to the latest Proinversión report, Spain is the second largest investor country since June 2023, focused on the communication and finance sector with over 500 Spanish companies incorporated in Peru.
2. Aligned regulations on Transfer Pricing
In this regard, the Tax Administrations of both jurisdictions are aware of the interaction in transactions within the Transfer Pricing area, so each country has legislation aligned with the guidelines of the Organisation for Economic Co-operation and Development (OECD). According to the above, we will address the current Transfer Pricing regulations in Peru and Spain herein.
3. Three Levels of Annual Transfer Pricing Documentation and Compliance
According to the report on action 13 of the BEPS project, both countries have incorporated three levels of documentation into their legislation: Local Report (support of the market value of transactions under the Transfer Pricing scope), Master File (detailed information on the structure and organization of an economic group) and Country by Country Report (information on income, profits, taxes, among other aspects of the economic activities of the multinational group members). In this regard, both the SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria – National Superintendency of Customs and Tax Administration) and the AEAT (Agencia Estatal de Administración Tributaria – State Agency of Tax Administration), establish compliance with the market value of transactions carried out with non-domiciled and domiciled related parties, as well as those carried out with countries or territories classified as tax havens. Likewise, for both countries, the obligations are annual, according to the conditions established in their legislation.
4. Implications of Increased Intra-Group Trade
Additionally, due to globalization, it is common for economic groups to carry out transactions between the companies that make them up, in addition to agreeing on intra-group services to optimize the performance of their business activities, such as back office and management services. Conversely, it has a risk with the allocation of unnecessary expenses affecting the calculation of income tax.
5. Benefit Test: Fundamental Principles and Compliance
Consequently, Peru and Spain, as well as other OECD-aligned countries, consider within the Transfer Pricing regime the review of the deductibility of intra-group service expenses through three fundamental principles: Trustworthiness (documentation and information evidencing the effective provision of the service), causality (justification to render the service and support of the profit obtained) and reasonableness (allocation of costs, expenses, and margin, according to the classification of the service). In Peru, since the fiscal year 2017, according to Legislative Decree No. 1312, published on December 31, 2016, and Legislative Decree No. 1369, published on August 2, 2018, compliance with the Profit Test came into force, which implies the preparation of a report supporting the aforementioned principles to determine the corporate income tax. Currently, audits focused on verifying whether the expenses for services received from related parties comply with the Profit Test are more recurrent, given that SUNAT refers to the transactions reported in the Informative Affidavit Local Report.
6. Consequences and Fines for Non-Compliance
Finally, each country establishes fines or penalties for errors, omissions, and/or non-compliance with transfer pricing obligations, which can significantly affect the economic situation of taxpayers.