By Zaida Limongi, Analist of TP Consulting Perú
The Peruvian tax administration on 15 April addressed two important points concerning transfer pricing analysis.
Report 036-2021-SUNAT / 7T0000 considers when the tax administration can use information from years before or after the fiscal year at issue to make a transfer pricing adjustment to the value agreed by the related parties.
Consistent with OECD guidelines, the Peruvian regulations provide that information on similar transactions carried out in previous years can be considered only to take into account different elements to better reflect economic reality or improve the comparability criteria applied to the operations being analyzed. Namely, the information can be used to consider aspects such as the economic life cycle of a product when the cycle exceeds more than one year; consider circumstances that could have an impact on the determination of the agreed price; and consider consecutive losses when it is necessary to determine the origin of said losses that would be affecting or influencing the profitability of the operation.
Information from previous fiscal years can also be used as a reference to determine whether the operations to make a comparison constitute a suitable comparable element to be analyzed or considered in the determination of the arm’s length principle. It is worth mentioning that this information cannot be used to prepare interquartile ranges; it can only be considered to establish criteria to carry out comparability analysis to determine whether the transactions used as comparables function as comparables.
For some consultants this position presented by the tax administration is a bit controversial; however, in other countries that are part of the OECD they are already applying this form of analysis.
The new inform also clarifies that a nonresident entity that transacts with a Peru resident taxpayer can be the tested party. In this scenario, Peruvian regulations also follow OECD transfer pricing guidelines.
This all depends on what is meant by “comparable” and what approach is being used. If the analysis is focused on the profit margin for a distribution affiliate (TNMM) then doing a multi-year comparison may make sense. But not if one is comparing commodity prices ala a CUP analysis. Did this analysis provide any examples on this score?