Peru - "Sixth Method" provisions are being replaced by other approach that seems more in line with ArmĀ“s Length Principles

On Saturday, December 31, 2016 Government published Legislative Decree 1312, in the Official Gazette Decree that modifying parts of the Income Tax, particularly related to Transfer Pricing:

Amends in paragraph 1 of point  e) article 32-A of the Income Tax Law. Basically most  of the "Sixth Method" provisions are being replaced by other approach that seems more in line with Arm´s Length Principles.
It is explained that the uncontrolled comparable price method consists in determining the market value of goods and services between related parties considering the price or the amount of the consideration that had been agreed with or between independent parties in comparable operations. In the case of exports or imports of goods with a known price in the international market, the local market or the market of destination, including those of derivative financial instruments, or with prices that are determined by reference to the prices of those markets, the market value Is determined on the basis of such quoted values. To determine the market value, the date of the quotation value should be considered as the date of the shipment of goods exported or the landing of imported goods. Specific regulation will  indicate the relation of goods included, the market or the characteristics of the market from which the quotation is obtained, the market price to be considered, and the adjustments that are accepted to reflect the characteristics of the good and the type of operation.

Amends in  point  g) article 32-A of the Income Tax Law. Basically starts with BEPS implementation in the country.

Taxpayers subject to the scope of transfer pricing regulations and whose income accrued in the taxable year exceeds 2,300 Tax Units (around $2.7 million)  must submit annually (starting from 2017)  the Local File, with respect to transactions that generate taxable income and / or costs or expenses deductible for tax determination. Notwithstanding the foregoing, the SUNAT may require compliance with said obligation in some other cases.

Taxpayers who are part of a group whose income accrued in the taxable year exceeds 20,000 Tax Units (around $23.8 million) must submit annually the Master File (starting on 2018). The  Master File will contain, among others, the organizational structure, description Of the business or business and the transfer pricing policies regarding intangibles and group financing and their financial and fiscal position. Likewise, taxpayers who are part of a multinational group must submit annually, (starting on 2018)  in accordance with what is stipulated in the regulation, the affidavit reporting Country-by-Country Report containing, among others, information related to the global distribution of income, taxes Paid and business activities of each of the entities belonging to the multinational group that carry out their activity in a particular country or territory. The SUNAT (Peruvian Tax Authority)  may not rely solely on the country-by-country report reporting affidavit to make transfer pricing adjustments.

Detailed ruling is expected in the coming days to guide in the preparation on the Local Files as well as the specific implementation of the CUP method for commodities as well as some further details in the formal obligations around transfer pricing. We will keep you posted.

In Market Facilitators, we have developed a BEPS offering intended to accommodate for a soft landing and swift implementation of these important changes by the taxpayers.


Source: Market Facilitators (TPA Global Alliance Partner, Peru)


Transfer Pricing Associates introduces TPA LATAM Desk. TPA LATAM Desk specialises in the development and implementation of LATAM Transfer Pricing systems to assist multinational enterprises (MNEs) to proactively and efficiently manage and implement their transfer pricing policies in a cost-effective, practical and swift manner; ensuring compliance with local transfer pricing legislation across LATAM.

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