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Peruvian Government Amend Tax Regime

21 Aug 2012

The Executive Branch of the Peruvian Government has modified the current Peruvian Tax Regime. The Government's main purpose has been to facilitate and increase tax collection, while preventing tax elusion. Important amendments have been introduced to Income Tax (IT) and Value Added Tax (VAT) regulations, as well as to the Tax Code. Taxand Peru summarises the amendments which could have a significant impact on international transactions.

  • Tax elusion
    In terms of tax elusion, the substance over form rules of the Tax Code have been broadened. The Peruvian Tax Administration (SUNAT) is now able to disregard not only false transactions used by taxpayers, but also structures considered "artificial or inappropriate to achieve a determined outcome", which are used to obtain a fiscal advantage.
  • Transfer Pricing (TP) rules
    Peruvian organisations with international transactions (which are subject to TP rules), where no consideration has been established, will be obliged to pay an amount equivalent to the withholding tax that would have been due if a fair market value had been agreed. Likewise, Bilateral Advanced Pricing Agreements may be executed within a jurisdiction where a Tax Treaty is in force with Peru. The new TP rules will be in force 1 January 2013.
  • Controlled Foreign Corporations (CFC) regime
    Starting 1 January 2013, a CFC regime will be applicable for the first time in Peru. Similar to the new "International Fiscal Transparency Regime", a CFC is an offshore, low-taxed entity which is at least 50% owned by entities or individuals based in Peru. CFCs will be considered pass-through entities regarding their foreign source income. Such income will be taxed on its Peruivan owners as it is obtained by the CFC.
  • Export of Services
    The 2011 Export of Services Promotion Act, which included several services rendered in Peru and was used abroad as VAT free exports, has been repealed. Therefore a more restrictive regime of export of services is now applicable.


Taxand's Take

Foreign investors must observe careful tax planning in order to obtain the most from their investments in Peru, while avoiding any future tax contingency.The amendments are not the only ones introduced to the Peruvian Tax Regime, but they are considered to be the most relevant from an international point of view. Nevertheless, a foreign investor should also be aware of any other tax modification that may affect a transaction or business opportunity.

Your Taxand contact for further queries is:
Pablo Sotomayor
T. +511 610 4747

Taxand's Take Author