Taxpayers should review the local file requirements to ensure they have complied.

In Ruling N° 014-2018/SUNAT (January 18, 2018), the Peruvian tax authorities (SUNAT) require taxpayers to electronically submit the local file on an annual basis in June of the following year. The deadline for submitting the first local file for fiscal year 2016, however, has been postponed until April 2018. For the exact filing date, taxpayers should refer to the schedule that provides a filing date depending on the taxpayer's identification number. SUNAT publishes the schedule annually.

Background

In December 2016, Peru introduced transfer pricing documentation requirements in accordance with Action 13 of the Organisation for Economic Co-operation and Development's (OECD) BEPS Action Plan (i.e., local file, master file, and country-by-country (CbC) report). On November 17, 2017, the Peruvian Government issued Supreme Decree N° 333-2007-EF, which approved regulations containing guidance for the preparation and submission of the local file, master file and CbC report.

In accordance with those regulations, the local file documentation requirement will apply only to taxpayers whose annual revenue for the fiscal year exceeds 2,300 Tax Units (approximately USD 2.95 million).

SUNAT's ruling

Under the ruling, taxpayers that exceed the threshold of 2,300 Tax Units will only be required to prepare and submit the local file if, during the year, any of the following conditions are met:

— Annual related-party transactions in aggregate are equal to or greater than 100 Tax Units (approximately USD 129,000) but less than 400 Tax Units (approximately USD 515,000); in this case, SUNAT only requests that the local file include general information about the related parties involved and the transactions analyzed

— Annual related-party transactions in aggregate are equal to or greater than 400 Tax Units (approximately USD 515,000); in this case, the local file requirements are largely consistent with those under Action 13 of the BEPS Action Plan

A local file with detailed information also will be required when the taxpayer has intercompany transactions involving the transfer of goods with a fair market value that is lower than their cost basis, regardless of the amount of the transaction.

The information required in the local file should show that the taxpayer has complied with the arm's-length principle in its transfer pricing positions. The local file focuses on information relevant to the transfer pricing analysis related to intercompany transactions (both domestic and cross-border) and transactions between the local taxpayer and residents in tax haven jurisdictions. Such information includes relevant financial information on those specific transactions, a comparability analysis, and the selection and application of the most appropriate transfer pricing method.

The due date for filing the first local file for fiscal year 2016 is in April 2018. From fiscal year 2017 and onwards, the submission deadline is in June of the following year. The exact filing date for each taxpayer depends on an official schedule based on the taxpayer's identification number.

Other key considerations

The local file should be submitted electronically on the official form approved by SUNAT. Failure to comply could result in penalties. Further, non-compliance with the new transfer pricing documentation obligations is likely to increase audit risk.

In general, the master file, the local file and the CbC report should be translated to Spanish and the documentation and information that supports their content kept by the taxpayer for five years or during the statute of limitations period established by the Tax Code, whichever is longer. The information contained in these documents can be used by SUNAT for tax audit purposes and could be shared with other jurisdictions through the automatic exchange of information, under government-to-government mechanisms, such as bilateral tax treaties or information exchange agreements.

Under these new reporting requirements, taxpayers must disclose more information. Because of the time required to deal with the new disclosure requirements, taxpayers should begin working on the documentation as soon as possible.

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