An analysis by Garrigues Peru
Peru’s tax authority, SUNAT, has changed its interpretation of the Double Taxation Agreement with Chile regarding the indirect transfer of shares. Initially, SUNAT said such gains were only taxed in Chile, but now they may also be taxed in Peru. It is suggested that the new interpretation will apply to indirect transfers of shares carried out from 8 June 2001, and is binding on all officials of the Tax Administration.
Taxand experts from Garrigues Peru analyse this new interpretation in the article below…
On December 28, 2023, the Peruvian Tax Administration – SUNAT published Report No. 117-2023-SUNAT/7T0000, by which it introduces a new interpretation criterion of the Double Taxation Agreement – DTA between Peru and Chile, in relation to the indirect transfer of shares , revoking the previous criterion contained in Report No. 001-2021-SUNAT/7T0000.
SUNAT initially interpreted by means of Report No. 001-2021-SUNAT/7T0000 dated January 31, 2021 that, under the terms of the DTA with Chile, the capital gain obtained by a Chilean resident who indirectly transfers shares of a Peruvian company would be taxed only in Chile.
The aforementioned report was based on the consideration that income from an indirect transfer of shares qualified under the assumption of Article 13 paragraph 5 of the DTA with Chile, according to which the capital gain derived from the transfer of any “other asset”, other than certain movable or immovable property, is considered taxable in Chile (considering as “other asset” the indirectly transferred shares).
Currently, by means of Report No. 000117-2023-SUNAT/7T0000, SUNAT has revoked the aforementioned criterion and has interpreted that, in application of the DTA with Chile, the capital gain obtained by a Chilean resident who indirectly transfers shares of a Peruvian company may also be taxed in Peru.
The new criterion is based on the fact that, at the time the DTA with Chile was entered into, there were no Peruvian or Chilean regulations regarding capital gains on indirect transfers of shares, but only on direct transfers. Therefore, a “normal, ordinary, non-extraordinary” interpretation of the provision of the DTA does not include the indirect transfer of shares under the assumption of transfer of any “other asset”. Instead, such a circumstance would lead to apply the provision of Article 21 of the DTA with Chile, which refers to income that is not expressly mentioned in the said DTA, thus being subject to taxation in both Chile and Peru.
It is important to emphasize that the new interpretation of SUNAT is binding on all officials of the Tax Administration and, although the text of the report is not entirely clear, it seems to suggest that it will be applied to indirect transfers of shares carried out as from June 8, 2001, the date of the signature of the DTA with Chile.
For similar content to our Global Guide, subscribe to our mailing list and keep up to date.
