Mining Corp had deducted interest payments on an intra-group syndicated loan of $200.000.000 of which it stated an amount of $94,500,000.00, had been used, that is, a part of the syndicate $200,000,000.00, which was the subject of the loan, had been used to prepay the same loan for $65,000,000.00 and $29,500,000.00. Following an audit the tax authorities issued an assessment where, among other issued, deductions of interest payment on the loan had been adjusted. According to the tax authorities the accounting record of the credit or income from financing or the Cash Flow Statement was not sufficient to support the financial expenditure, especially if this does not demonstrate the movement of the money and its use in acquisitions, payments to third parties and other activities related to the line of business. In order to prove the use of the resources obtained, it was necessary to ... Read more

A foreign group had transferred funds to one of its branches, Perupetro, in Peru and claimed that the transfer was a capital contribution – and not a loan. Following an audit the tax authorities issued an assessment, where the funds transferred were considered a loan and withholding taxes on the interest payments had been lifted. An appeal was filed by Perupetro. Perupetro held that the transfers of funds made by its non-domiciled parent company in its favour in the financial year 2014 constitute assigned capital (capital contributions) and not loans as considered by the Administration. It pointed out that the tax authorities has not followed the procedure established by the Income Tax Law and the OECD Guidelines to delineate the operation observed, a situation that would have allowed it to note that it does not qualify as a loan. Perupetro further claimed that the tax ... Read more

Telefónica have been in a long lasting tax dispute with SUNAT – the Peruvian tax authorities – over various tax and transfer pricing issues, and interest on tax debt has been accumulating. Telefonica requests the non-application of article 33 of the Tax Code with regard to the late payment interest on the tax debt related to income tax for the years 2000 and 2001, with respect to the periods that exceed the deadlines set forth in articles 142, 150 and 156 of the aforementioned code. Judgement of the Constitutional Court In this Judgement, the Constitutional Court declares Telefónica’s claim for violation of the right to reasonable time and ORDERS the recalculation of the default interest without considering those generated in excess of the legal time limit established to resolve the dispute. Although the purpose of late payment interest is to encourage the payment of taxes, ... Read more

In February 2019, Colegio de Abogados de La Libertad (CALL) in Peru filed an appeal before the Constitutional Court claiming that tax debts of at least 9 billion soles (USD 2,5 billions) owed by 158 large companies could not be collected by the tax authorities (SUNAT) due to the statute of limitation in Legislative Decree 1421. By four votes against and one vote for, the Constitutional Court rejected the claim. NoCOMPANY/TAXPAYERSTATUTE OF LIMITATIONS INVOKEDSTATUTE OF LIMITATIONS NOT INVOKEDTOTAL 1COMPAÑIA DE MINAS BUENAVENTURA S.A.A.2.083.106.4842.083.106.484 2SCOTIABANK PERU SAA1.076.546.4201.076.546.420 3COMPAÑIA MINERA ANTAPACCAY S.A.2.961.028725.065.302728.026.330 4MINERA LAS BAMBAS S.A.698.986.212698.986.212 5SOCIEDAD MINERA CERRO VERDE S.A.A542.560.586542.560.586 6TELEFONICA DEL PERU SAA301.180.21257.714.287358.894.499 7LATAM AIRLINES PERU S.A.332.312.17118.782.845351.095.016 8CONSORCIO MINERO S.A. EN LIQUIDACION122.737.710171.965.780294.703.490 9EMPRESA MINERA LOS QUENUALES S.A.255.456.549255.456.549 10AMERICA MOVIL PERU S.A.C.246.510.566246.510.566 11ENEL GENERACION PERU S.A.A.236.223.504236.223.504 12VOLCAN COMPANIA MINERA S.A.A161.464.638161.464.638 13SUPERMERCADOS PERUANOS SOCIEDAD ANONIMA 'O ' S.P.S.A33.294.659104.866.817138.161.476 14UNIVERSIDAD PERUANA DE CIENCIAS APLICADAS S.A.C128.889.678128.889.678 15COMPANIA MINERA ANTAMINA ... Read more

“TELE SA” had applied a 15% withholding tax rate to lease payments for telecommunications equipment purportedly provided by a Chilean company that had been established by the Mexican parent of the “TELE” group. TELE SA claimed the payments qualified as royalties under Article 12 of the Peru-Chile double tax treaty. The Peruvian Tax Authority found the reduced 15 % rate did not apply to the lease payments because the Chilean entity was not the beneficial owner of the royalty payments. Hence an assessment was issued where withholding taxes had been calculated using a 30% rate under Peruvian domestic tax legislation. An appeal was filed with the Tax Court. Judgement of the Tax Court The Tax Court upheld the decision of the tax authorities and dismissed the appeal of “TELE SA”. The 15% withholding tax rate for royalty provided for in Article 12 of the double ... Read more

“P Services! provided services to a Peruvian consortium. In 2014, the parties entered into an interest-free loan agreement. According to the loan agreement, payment for the services performed in 2013 was going to be offset against the funds received under the agreement. The tax authorities found that the “loan arrangement”, in reality constituted advances for the services provided by “P Services”- According to the authorities the arrangement had been established for the purpose of avoiding VAT on the advances received for the services. Decision of the Tax Court The tax court issued a decision in favour of the tax authorities. Click here for English translation Click here for other translation Peru vs Taxpayer 2020_5_03052 (002) ... Read more

Telefónica brought before the Supreme Court of Peru the following issues related to a long lasting dispute with SUNAT – the Peruvian tax authorities: 1: Financial Charges – Carve Out 2: Withdrawal of assets of majority shareholder Telefónica del Perú S.A.A. 3: Depreciation of fixed assets transferred 4: Tax deduction for “Overhead” 5: Provision for doubtful debt collection The Supreme Court agreed with the tax authorities on issues 1 and 4 (carve out financial charges, related to the way in which they were financed; and the overhead tax deduction, which the tax authorities considered to be an incorrect application of accounting standards). The remaining three issues are still awaiting final determination. Click here for English Translation Click here for other translation New1 Corte Suprema de Justicia de la República ... Read more

During an audit for the FY 2010 “Doc Request SA” was requested to submit information and supporting documentation on expense accounts, acquisitions of goods and services, ISC commission accounts paid etc. after the ordinary one-year audit period established by Article 62º-A of the Tax Code had already expired. The taxpayer filed a complaint arguing that the exception to this one-year period provided for in paragraph 3 of Article 62º-A, referring to the audits carried out in regards of transfer pricing rules, was not applicable, given that the requested information and documentation did not related to transfer pricing. Decision of the Court The Court decided in favour of “Doc Request SA”. Excerpt “…the complainant was requested to submit information and supporting documentation on expense accounts, acquisitions of goods and services recorded in the Book, charges to the ISC commission accounts paid and unreported airline tickets flown, ... Read more

Following an audit the tax authorities issued an assessment, where the interest rate on a loan had been changed based on application of transfer pricing rules. An appeal was filed by “Holding S.A.” arguing that the transfer pricing rules do not apply to the loan operations observed, since there has not been a lower payment of income tax as required by paragraph a) of article 32-A of the aforementioned tax law, This is also not verified by having obtained losses in the years 2000 to 2005, since being a holding company and only receiving income from dividends, such losses cannot be carried forward, in addition to the fact that the only effect of the objection formulated is to reduce the loss and not to determine a higher tax payable. Judgement of the Tax Court The Tax Court sets aside the assessment and decided in favour ... Read more

“Copper Corporation S.A.” had deducted intra-group service payments in it’s taxable income. The Peruvian tax authorities determined that the documentation provided by the company did not sufficiently support the actual provision of these services. Hence, tax deductions for the expenses was denied. The case was taken to the Tax Court The court dismissed the appeal and upheld the assessment issued by the tax authorities. Click here for English Translation Peru VS Tribunal Fiscal 22 July 2011_8_12609 ... Read more