ALERTS
First pronouncement of the Tax Court on the requirements to deduct intra-group services: RTF No. 02374-4-2025
What it said, the doubts it sows and what comes next
Context
- About the additional requirements to deduct intragroup services: ‘profit test’, ‘documentation of costs and expenses incurred by the supplier’ and its ‘allocation criteria’.
Since 2017 the Income Tax Law (Art. 32°-A, item i) requires that in order to deduct costs and expenses of intra-group services the taxpayer must additionally:
- Comply with the ‘benefit test’ proving that the service provides economic value for the recipient of the service; and,
- Submit documentation, among other points, on (a) the ‘costs and expenses incurred by the service provider’, and (b) of ‘the reasonable allocation criteria’ of those.
The Administration applies these requirements with very controversial criteria, for example, demanding documentation that is only in the domain of the service provider, such as: ‘payrolls’, ‘pay slips to workers’, ‘lease contracts’, and similar. This regardless of whether the service, by its nature, is not remunerated based on the costs and expenses of the supplier (i.e. sales commissions), or without taking into account that in many cases the domiciled companies are managed independently from their foreign affiliates, without access to their information.
Therefore, it is important to have pronouncements from the Tax Court and the Judiciary to evaluate and judge whether the position of the Administration complies with the legal parameters and constitutional principles.
What the Tax Court said
- Position of the Tax Court in RTF 02374-4-2025
In this context, last March 14, the Tax Court issued RTF 02374-4-2025, which comes to be the first resolution at the administrative level that rules on the application of the aforementioned requirements.
The resolution dealt with the case of an aeronautical company that had deducted in the 2017 fiscal year expenses from intra-group services of various kinds (aircraft subleasing, logistic, administrative and corporate services, interlinear commissions, etc.). However, SUNAT rejected the deduction alleging that the benefit test was not accredited, because the costs and expenses incurred by the provider were not documented, nor the allocation criteria.
In this regard, the Tax Court confirmed SUNAT’s decision, considering that:
- Some intra-group contracts stipulate that the calculation of the consideration is made on the basis of the supplier’s total costs. In this sense, it was necessary to know such concepts and that they are supported with the respective documentation.
- Many of the services received required ‘human capital intervention’, so it was necessary to prove their cost, identifying ‘the assigned personnel involved in the provision of the service, the time assigned (exclusively or shared with other related parties), the function performed, among others’.
- The taxpayer had not submitted the ‘documentation recording the amounts recorded as costs and/or expenses incurred’, as well as the profit margin applied.
Our comments
- Comments to RTF No. 02374-4-2025
The Tax Court confirms the Administration’s controversial position according to which in the fiscal year under analysis the requirements under analysis are applicable:
- To all types of intra-group services regardless of whether the service by its nature or contract is not remunerated on a cost and expense basis. Thus, according to the position of the Tax Court, the requirements would be applicable even to services that are remunerated with a percentage remuneration, such as in the case of commissions.
- Without any limit of evidentiary reasonableness, since the request for information on ‘personnel’ and ‘hours incurred’ by the service provider is validated, for example, even though it is documentation outside the sphere of control of the taxpayer who deducts the expense, and which in some cases is irrelevant to fix the remuneration (i.e. when the service is remunerated based on a percentage of sales as in the case of commissions).
Likewise, the decision sows several doubts since it seems to confuse two legally different requirements such as (a) the benefit test; and (b) the requirement to submit documentation. Additionally, the correct procedural way to apply these requirements in a partial audit is not evaluated.
Being RTF No. 02374-4-2025 the first one on the requirements of Article 32°-A, paragraph i) of the Income Tax Law, it is necessary to wait for additional decisions to speak of a uniform jurisprudential criterion, and for such criterion to be confirmed by the Judiciary. In this sense, there is still a long way to go to know the correct scope of the aforementioned paragraph i).
Recommendations
- Steps to follow in consideration of the RTF No. 02374-4-2025
Until a clear jurisprudential criterion is defined, it is advisable that companies that deduct intra-group services expenses take the following precautions:
- Review the transfer pricing policy for intragroup services when the company is a user of these. To this end, the nature of the service, the contractual remuneration scheme, the review of the policy reflected in the Local Reports, and the information collected in the so-called ‘Profit Test’ reports should be verified.
- Verify the availability and consistency of supporting documentation on costs and expenses incurred by service providers, and of allocation criteria. This is especially true in cases where the services are provided by foreign affiliates, in order to be able to make the corresponding requests for information.
- Re-evaluate the legal position and strategy adopted by the company in audits, claims and appeals, where the deduction of intra-group services is reviewed.
For further information, please contact Tulio Tartarini (ttartarini@estudiorodrigo.com), Paul Nina (pnina@estudiorodrigo.com) and/or Paolo Abregú (pabregu@estudiorodrigo.com).
