Peru tax authority addresses appropriate method for intra-group services under prior law

By Carlos Vargas Alencastre, CEO, TPC Group, Peru

Peru’s tax administration on March 18 issued guidance clarifying the transfer pricing rules applicable to intragroup services other than low value-added services prior to 2018. The guidance addresses the amount of deduction or expense from income under prior law for these services. 

At issue was whether prior law provided that all intragroup services were subject to special rules for low value-added services, which limit the deduction to the amount equal to the sum of the costs incurred by the entity that provided the service, together with its profit margin, which should not exceed 5%.

Although these provisions were modified by Legislative Decree No. 1369, in force as of January 1, 2019, the question arose whether prior law had excluded the use of the transfer pricing methods referred to in Article 32-A (e) of the Income Tax Law to determine the value of the intra-group services other than those that are low added-value.

The new guidance clarifies that all transfer pricing methods for services could apply under prior law, in accordance with the best method rule.

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Carlos Vargas Alencastre

Managing Partner at TPC Group

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)

• Peru tax authority addresses appropriate method for intra-group services under prior law - April 5, 2021
• Peru issues new tax guidance on indirect transfers - June 7, 2019
• New Peru transfer pricing guidance addresses related-party share transfers - May 23, 2019

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