By Carlos Vargas Alencastre & Franz Salazar Anccasi, TPC Group, Lima, Peru
Peru’s tax administration on 16 May issued new transfer pricing guidance addressing the tax treatment of transfers of undervalued Peruvian entity shares involving foreign related parties.
The guidance concludes that for such undervalued transfers, the cost of the acquirer’s shares should be the acquisition price plus any transfer pricing adjustment.
The guidance, Informe No. 057-2019-SUNAT/7T0000, stipulates that any transfer pricing adjustment on the transfer of a Peruvian entity’s shares involving a foreign related party would affect both the acquirer and issuer if there would be less Peruvian income tax or greater allowed deductions or costs applying Peruvian income tax laws.
In that context, the guidance concludes that in any cross-border transaction between related parties involving a Peruvian entity’s shares, a transfer pricing adjustment by the taxpayer or Peruvian tax administration might affect both the recognized income tax of the issuer and the cost basis of the acquirer. It also adds that this tax fiction should only be reflected as an addition to income tax, not in financial statements.
Therefore, the new cost basis of the acquirer might be the acquisition price plus any transfer pricing adjustment since any transfer pricing adjustment affects both the recognized income tax of the transferor and the cost of the acquirer.
In our opinion, this new Peruvian tax administration guidance is welcome because it will reduce the incidence of international double taxation.
Carlos Vargas Alencastre
Carlos Vargas Alencastre is a public accountant and auditor based in Lima, Peru. He is managing partner of TPC Group in Latin America.
Vargas Alencastre has significant international tax and transfer pricing experience. He has practiced transfer pricing for over twenty years, advising clients on transfer pricing controversies and valuation matters in LATAM, the United States, and Spain.
He has also acquired expertise in global expansion projects for multinational enterprises that have developed and maintained businesses in foreign markets (including advice on international tax matters and advisory).
Vargas Alencastre is a frequent speaker at tax conferences, addressing transfer pricing and international tax issues such as information exchange among tax authorities. He holds an accounting degree from Universidad Inca Garcilaso de la Vega.
Latest posts by Carlos Vargas Alencastre (see all)
TP Business Consulting SAC
Av. Manuel Olguín 501
Santiago de Surco
Lima 33 - Perú
Phone: +51 1 6279787
Fax: +51 1 4364612
Email: [email protected]
Franz Salazar Anccasi
Franz Salazar Anccasi is a tax and legal senior with TPC Group, Peru. Through his work at TPC Group, Franz assists clients in the field of international tax law and transfer pricing, focusing on tax treaties and their impact on cross-border transactions.
Franz is a qualified lawyer in Peru since 2013. Before joining TPC Group, Franz worked as a tax senior at an international consulting firm in Peru. He holds a Master of Laws (LLM) in International Taxation from the University of Florida.
Franz is a frequent speaker at tax seminars and workshops for clients and the public. Franz's interests lie in international taxation in the mining and financial service sectors.
Franz can be reached at [email protected]
Latest posts by Franz Salazar Anccasi (see all)
TP Business Consulting SAC
Av. Manuel Olguín 501
Santiago de Surco
Lima 33 - Perú
Phone: +51 1 6279787
Fax: +51 1 4364612
Email: [email protected]
Be the first to comment