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04 January 2019 Peru issues regulations on deduction of expenses related to intragroup services and definition of accrual On 30 December 2018, Peru’s Minister of Economics issued Supreme Decree 337-2018-EF and Supreme Decree 339-2018-EF, which contain regulations on the deduction of expenses related to intragroup services and the definition of accrual. Both Supreme Decrees went into effect on 1 January 2019. According to Peruvian income tax legislation, intragroup services (including both local transactions and cross-border transactions) must be at fair market value under the arm’s-length principle (transfer pricing rules following Organisation for Economic Co-operation and Development (OECD) guidelines). Specific rules apply to calculate the margin of profit, particularly in the case of low-value-added services. To deduct the payment for intragroup services, the Peruvian entity must: (i) satisfy the benefit test (i.e., demonstrate that the intragroup services provided an actual commercial or economic benefit); and (ii) have supporting documentation, providing the nature of the services and proof that: (a) the services were rendered; (b) there was a real need for the services; and (c) the service provider incurred costs and expenses. Supreme Decree 337-2018-EF establishes the requirements for the benefit test and the supporting documentation, as well as the procedure to calculate the margin of profit. It also establishes which services do not qualify as low-value-added services. Peruvian income tax legislation has specific rules for when income is considered “accrued” for income tax purposes, and those rules do not necessarily coincide with current accounting standards. Specifically, the income tax law establishes that income is accrued when the substantial events for its generation have occurred, provided that the right to obtain the income is not subject to a condition and regardless of when the income is collected. However, when the consideration is set on a “future event,” the income accrues when the future event occurs. Supreme Decree 339-2018-EF defines “future event” as any subsequent event, new and different from the substantial event that generates the right to obtain the income or the obligation to pay the expense. Thus, an event is considered a future event when the consideration is fixed, taking into account factors such as sales, produced units or profit obtained. Certain events are not considered future events, such as a payment adjustment due to verification of quality, quantity, height or volume. Ernst & Young Asesores S.C.R.L, Lima
Ernst & Young, LLP, Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
Document ID: 2019-5025 |
