DO YOU MEET THE BENEFIT TEST?
The contracting of intra-group services is a common practice in economic groups when it comes to creating synergies and maximizing results within the group.
It is usual for Peruvian companies belonging to economic groups to contract services of different kinds to their related parties, such as administrative support services (back office), management services, among others, which, in a normal situation, are deducted for purposes of determining their annual income tax.
In the context of the audit procedure, where the Tax Administration verifies the determination of the taxes payable by taxpayers, it is common for said entity to request documentation that proves the reliability of the services received by its parent company or other entities with which the taxpayer is related, as well as documentation that proves the need to contract them and the commercial value that said services represent for the contracting company.
Indeed, the Income Tax Law provides that, in the case of services carried out between related parties, commonly referred to as intra-group services, the deductibility as an expense or cost generated by the acquisition of such services requires that, among other requirements, the so-called Benefit Test is met.
It is understood that this test is met when the service provided provides an economic or commercial value for the recipient of the service, improving or maintaining its commercial position, which occurs if independent parties have satisfied the need for the service, performing it by themselves or through a third party. Along these lines, there cannot be duplicity of similar services provided by employees of the same company, since it is required to justify the provision of the service in the context of the business of the group or multinational group.
Additionally, taxpayers are required to identify the relationship between the service received and the consideration, in order to determine whether the value agreed by the parties is the one that corresponds to the costs and expenses incurred by the service provider and the profit margin of the latter.
Not having the due support may result in the non-deductibility of the expense and, consequently, the impossibility of using the tax credit related to the operations limited by the Tax Administration, raising, consequently, the effective tax rate.
Therefore, it is necessary to have the proper advice to guarantee and support the deductibility of expenses for intra-group services that, at first sight, appear to have all the conditions to be deductible for income tax purposes, however, once the audit procedure is initiated, this is not the case.
At CPB we advise you on the correct support of expenses related to intra-group services, so that when the Tax Administration knocks on the taxpayer's door, they will find the proper technical and documentary support.
