Income Tax Review Advice: What does it include and when should it be hired?

1. The Income Tax Review as a Tax Control Tool

Income Tax review advice should not be understood as a simple subsequent accounting verification, but rather as a preventive tax control process that allows companies to validate the correct determination of their net taxable income and detect possible contingencies before filing their annual return.

In an environment of more active oversight by SUNAT, companies that rely only on their internal calculation run the risk of underestimating objections, omitting valid deductions or failing to identify relevant time differences.

A specialized review combines legal, accounting and financial criteria, and becomes an essential tool for protecting liquidity and tax reputation.

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2. What does income tax review advice include

The scope of a professional review is comprehensive. A good service is not limited to “reviewing figures”, but rather evaluates the technical fundamentals and regulatory coherence behind each component of the calculation.

At EBS Abogados, for example, the process comprises five axes of analysis:

a) Accounting-tax reconciliation under IFRS:

The adjustments and differences between the accounting profit and the tax base are reviewed, verifying that the applied IFRS do not generate undue objections.

Example: provisions for impairment, accrued income, depreciation, financial leases, or impairment of assets.

b) Evaluation of the principle of causality and deductibility

The reasonableness and sustainability of deductible expenses are analyzed, in accordance with Article 37 of the Income Tax Act.

This includes reviewing representation expenses, travel expenses, provisions, third-party services, and financial expenses.

c) Identification of non-deductible items and potential remedies

The review seeks to detect inappropriate items that could generate objections on the part of SUNAT: personal expenses, fines, donations not allowed or provisions without documentation.

d) Credit control, on-account payments and compensable losses

The correct application of favorable balances, withholding, on-account payments and accruable tax losses is reviewed, ensuring that tax benefits are taken advantage of and that the tax payment is not doubled.

e) Determination and analysis of the effective tax rate (TEI)

The effective income tax rate is calculated, comparing it with the sectoral average and with previous years, to identify tax inefficiencies or possible errors in the determination.

f) Detection of shields or tax efficiencies that allow the company to obtain tax savings in accordance with the Law

Legal mechanisms are identified to reduce the company's tax burden. This allows for risk-free tax savings, in strict compliance with current regulations.

3. When should you sign up for an Income Tax review

Review counseling is not a service that should be requested only in response to SUNAT observations; its greatest value lies in prevention.

Here are the scenarios in which it is best to hire her:

• Before the accounting close or filing of the annual return

This is the ideal time, since it allows you to correct deductions, compensate for losses and adjust accounting differences without the risk of penalties. The cost of a preventive review is much lower than the impact of a subsequent repair or fine.

• Faced with reorganizations, mergers or acquisitions of companies

An Income Tax review makes it possible to identify hidden liabilities and to validate the reasonableness of accumulated tax balances.

• When there are doubts about the application of IFRS or deductions

Changes in IFRS and their impact on the tax base create accounting uncertainty. A professional review ensures a correct and consistent tax interpretation.

• If the company has unusual variations in its effective rate

An increase in the TEI (Effective Income Tax Rate) compared to previous years or compared to the sectoral average is usually a sign of fiscal inefficiency or errors in deducting expenses.