5. Intragroup services

Intragroup services are those services provided by one entity of a business group to another entity or part of such group.

Legislative Decree No. 1312 introduced subsection (i) to Article 32-A of the LIR, effective as of 01.01.2017, which sets out specific rules applicable to services provided between related parties.

5.1. The Benefit Test 

With the aforementioned regulation, the “Benefit Test” was included in the LIR, which will be used to support the cost or expense with respect to services rendered between related companies.

The first paragraph of subsection (i) of Article 32-A of the LIR states that, “without prejudice to the requirements, limitations, and prohibitions established by this Law, in the case of services subject to the scope of subsection (a), the taxpayer must comply with the benefit test and provide the requested documentation and information as necessary conditions for the deduction of the cost or expense.”

The second paragraph of this regulation states that the benefit test is deemed to be met when the service provided delivers economic or commercial value for the recipient, improving or maintaining its business position, which happens if independent parties would have satisfied the need for the service, performing it themselves or through a third party.

Through this type of test, the review of the benefit must be verified from the perspective of the taxpayer themselves.

This will determine whether the taxpayer can be a potential user of a service that can be provided by a third party on their behalf, which also involves assessing the service to determine whether its provision to the user company is reasonable.

5.2. Documentation and information

The third paragraph of this regulation states that “The documentation and information provided must evidence the actual provision of the service, the nature of the service, the real need for the service, the costs and expenses incurred by the service provider, as well as the reasonable criteria for the allocation of these. In the event of a change in the allocation criteria, the taxpayer must justify the reason for and/or the need for such change.”

The fourth paragraph of this regulation states that “the deduction of the cost or expense for the service received is determined based on the sum of costs and expenses incurred by the service provider, as well as its profit margin”.

5.3. Low-Value-Added Services

In the case of low-value-added services, the deduction of the cost or expense for the service received is determined based on the sum of the costs and expenses incurred by the service provider, as well as its profit margin, which may not exceed five percent (5%) of such costs and expenses.

Low-Value-Added Services are considered those that meet the following characteristics:

• they are auxiliary or supportive in nature;  

• they do not constitute the main activities of the taxpayer or the multinational group, as applicable;

• they do not require the use of unique and valuable intangibles, nor do they lead to the creation of such intangibles; and

• they do not involve assuming or controlling a high or significant level of risk, nor do they generate a significant level of risk for the service provider. 

The regulation may indicate a reference list of services that qualify as low-value-added and those that do not.

In any case, both the cost and expense, as well as the profit margin, are valued in accordance with the comparability analysis outlined in subsection d) and are subject to the adjustments specified in subsection c).

Source: Transfer Pricing in Peru, Tax Activity Index or IAT, 2019. p. 45.

Legal basis: Fifth paragraph[1] and subsequent of subsection i) of article 32-A of the LIR.