Criteria on royalties for the use of trademarks

3 June, 2024

The recurrent audits of royalty expenses for the use of trademarks owned by the shareholders of the same company have brought to the jurisdictional field different criteria that do not always coincide.   

On the diversity of criteria

From the audits and proceedings on this matter, SUNAT has been observing that it is a potentially elusive transaction, and therefore the taxpayer is urged to support the causality of the expense. In view of this, two criteria have been identified to prove causality:  

  1.  Substantiate that the mark has potential revenue-producing value.  
  2.  Substantiate that the trademark generates effective income.  

The following are the positions set forth in Cassation No. 23232-2023-LIMA and RTF No. 05946-1-2019, which reflect the aforementioned criteria, respectively.  

Cassation No. 23232-2023-LIMA

Recently, Cassation No. 23232-2023-LIMA was published, which analyzes the case of a taxpayer that used the trademark owned by one of its shareholders, but it was not until it was registered before INDECOPI that it took as deductible expense the royalties paid to the shareholder for the use of the referred trademark.  

In view of this, the Administration considered that since the trademark was already being used, the taxpayer had already been enjoying the attributes of the trademark and therefore its registration did not generate an increase in its income. Therefore, it concluded to repair the expense, considering that it was not necessary to produce and maintain the income generating source.  

On the contrary, with respect to the controversy, the Tax Court pronounced through RTF No. 02638-4-2021, considering that the registration of the trademark generated that its legal situation changed, having as a consequence that its use requires the payment of royalties. Likewise, following the criteria determined by RTF No. 02422-5-2006 and 04971-1-2006, it argued that it is not necessary that the trademark generates an income, but that it must be potentially apt to produce it. Therefore, it concludes to revoke the objection determined by the Administration.  

In the same line, both the first instance and the appellate instance agreed that the expense for the royalties paid for the use of the trademark was necessary and had an objective link with the taxpayer’s activity.  

For its part, the Supreme Court expressly agrees with the criterion followed by the Tax Court; that is to say, it takes the criterion that the expense will be deductible to the extent that it has a potential value to produce income. It is also supported by the fact that the subsequent registration, and the consequent payment of royalties, would be a business management decision, which does not conflict with any legal prohibition. In this sense, the collegiate concludes in declaring unfounded the appeal filed by the Administration and not to cassify the judgment of the hearing.  

Ruling No. 05946-1-2019

 Tax Court in RTF No. 05496-1-2019 takes cognizance of the controversy raised by the royalty expense for the use of a trademark deducted by a taxpayer, being important to note that in the present case the referred trademark was also owned by one of the taxpayer’s shareholders.   

 In view of this situation, the Administration proceeded to audit the expense questioning its causality. In view of this, the taxpayer provided several documents in order to justify the expense. However, the Administration repaired the expense because it considered that the taxpayer did not prove that the use of such trademark had generated specific benefits, nor an increase in its income.  

The Tax Court in the resolution of this controversy not only agrees that for the deduction of the expense it must be proven that the use of the trademark generates effective income for the taxpayer, but also adds that the trademark contracted must have a previous value. This last requirement, which takes similar conclusion to the application of the DEMPE analysis, would allow to identify who is the actual owner of the trademark, which in turn resolves the dilemma of whether the expense is necessary for the production and maintenance of the income or not. In view of the above, the Court decided to confirm the objection imposed by the Administration. 

What criteria should be followed?

As can be seen, these are opposable criteria that generate that the taxpayer does not have clarity as to how to demonstrate the causality of the expense. However, the truth is that, as established in Cassation No. 16618-2023-Lima, the rulings of the Supreme Court are binding for SUNAT and the Tax Court.   

 By virtue of this, it is understood that the criterion taken by the Supreme Court in the analyzed cassation will prevail; that is to say, the royalty expense for the use of a trademark must be supported by the fact that the trademark offers the company a potential value to produce income to the taxpayer.  

 However, the reality reveals that both SUNAT and the Tax Court do not fully follow the pronouncements of the Supreme Court, so the taxpayer’s management should opt for the position that best suits its reality and always prepare a defense file to support its position.   


The analyzed expenses are under constant scrutiny by the Administration, since the Tax Administration may consider that this is a way for companies to pay a lower tax. Therefore, it is recommended to avoid that the contracted brand is owned by one of the shareholders of the company.   

In the event that the company has already contracted the brand owned by the shareholder, although the criteria to be followed is still quite dispersed, it is recommended to have specialized reports on the impact of the brand on the business, implement the DEMPE analysis, and have documentation to prove that the expense is necessary to produce and maintain the source of income.  

By virtue of the above, it is essential for companies to have adequate tax and legal advice, which allows them to foresee eventual audits and face possible tax procedures. At VAG GLOBAL we have tax lawyers who will provide your business with the solutions you need. 

Sources: El Peruano / Tribunal Fiscal / MEF