On January 1st, the reform to the Income Tax Law came into effect, modifying the Transfer Pricing Regime in Peru through Legislative Decrees 1662 and 1663.
Legislative Decree 1662 focuses on Advance Pricing Agreement (APA) programs. It should be noted that APAs are mechanisms that allow companies to propose an agreement to the Tax Authority regarding the Transfer Pricing methodology and implementation, for a particular transaction.
The modification introduced by this Decree allows retroactive application of APAs (“roll back”) agreed upon by SUNAT with taxpayers and with other competent authorities of countries with international treaties to avoid double taxation, provided that certain conditions are met. The introduction of this measure aligns with the guidelines of the Organization for Economic Cooperation and Development (OECD) and helps in the coordination of the negotiation terms within both parties.
Decree 1663, in turn, introduces the possibility of using alternative valuation methods for transactions under the Transfer Pricing scope, allowing for a more accurate reflection of the economic reality of operations. The methods introduced are Discounted Cash Flow (“DCF”), Multiples Method, Equity Participation Value, Appraisal Valuation, and Multi-Period Excess Earnings Method (“MPEEM”), depending on the type of transaction to be analyzed.