In the last few years, the Peruvian tax administration, through SUNAT, has intensified its inspection work on intra-group transactions, paying special attention to compliance with the so-called Benefit Test. This test is a key requirement in the Transfer Pricing and Tax documentation, since with respect to the latter, if the Benefit Test is not met, no cost or expense may be deducted for Income Tax purposes.
Recently, SUNAT has started to send Summons to several companies that have failed to comply with this obligation during the periods 2019, 2020, 2021 and 2022, as part of the tax control actions implemented to ensure that companies not only correctly declare their service transactions, but also properly justify them.
What is the Benefit Test?
The Benefit Test aims to demonstrate that intra-group services provide economic and/or commercial value to the recipient company. According to Transfer Pricing rules, only services that generate a benefit for the receiving entity can be considered in the determination of Transfer Pricing and, therefore, must be properly reflected in the Local File.
If you have services received by your related parties and do not have the Benefit Test, you will not be able to support cost or expense for income tax purposes, which is clearly a considerable tax detriment.
In many cases, companies do not include/expose information related to the test in the Local File, which generates observations by the tax administration, since it observes that there are intra-group operations between related parties.
How to regularize this situation?
In view of the massive notification of the Summons by SUNAT, taxpayers must comply with regularizing their situation by requesting that Transfer Pricing specialists prepare the corresponding Benefit Test. Except in those cases where it is considered that there is no obligation to have it, it must express the necessary arguments to be able to face this first disclaimer before SUNAT and a future audit before the Tax Administration.
It is vital that companies respond in a timely manner to these summons, providing all the documentation requested, such as the analyses signed by legal representatives justifying the omission of the Benefit Test. It is also recommended that companies proactively review their compliance in this regard, as future audits may detect other inconsistencies.
Conclusion
Compliance with Transfer Pricing regulations, especially regarding the Benefit Test, is a priority for the Peruvian tax administration. Companies that carry out intra-group transactions must ensure that these operations are adequately justified, both from an economic and documentary point of view, in order to avoid tax contingencies, such as (i) not knowing 100% of the cost or expense incurred by the Company for operations with its related parties, which means increasing the taxable base for Income Tax, paying an additional 29. (ii) payment of fines for omitted taxes, when as a result of not knowing the cost or expense there is income tax to be paid, without forgetting that (iii) the tax authorities may initiate auditing procedures in order to reassess the tax returns and collect a higher tax debt.
