Home » News No. 001-2023-PE | Benefit Test: Mandatory documentation for deduction of costs and expenses in intragroup services

News No. 001-2023-PE | Benefit Test: Mandatory documentation for deduction of costs and expenses in intragroup services

Benefit Test: Mandatory documentation for deduction of costs and expenses in intragroup services

Lima, March 20, 2023

Proof of the Profit Test is an essential aspect of transfer pricing compliance. This proof is used to prove that the service provided provides economic and commercial value for the recipient of the service.

Proof of the Profit Test, within Peruvian regulations, is a necessary condition for companies to be able to deduct their costs and expenses generated by the services they receive from their related parties, so they must support and document everything related to said services, so that they are tax deductible.

Scope of the Benefit Test

The benefit test refers to the requirements that must be met for an intragroup service to be considered valid for tax purposes. The benefit test consists of determining whether a service provided by your related party is beneficial to the recipient of said service. This is determined by evaluating the extent to which a service contributes to the company’s overall objectives and results. The test requires that the services are necessary for the company to achieve its objectives and that the services are profitable.

One of the main advantages of the benefit test is that it provides a clear framework for determining the economic value of intra-group services. This helps ensure that the prices charged for these services are fair and reasonable, and that they reflect the true value of the services provided.

Peruvian tax authorities will also assess whether intra-group service pricing conforms to the arm’s length principle, meaning that a fair market price is paid for the services. To demonstrate that a service provides a real economic benefit, it is necessary to provide evidence, such as a detailed description of the services provided, the pricing structure and the results that the service has had.

Conclusions

Overall, proof of profit for intra-group services is an important tool to ensure compliance with transfer pricing and promote transparency and accountability within related companies. By adhering to this test, businesses can help ensure they operate fairly and equitably, while promoting efficiency and economic growth.

For more information, contact us at asistente.gerencia@tpconsulting.com or by phone (511) 480-0170.

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