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Tax Newsletter – December 2019

TAX NEWSLETTER

REGULATIONS OF INTEREST

Benefits are extended to migrants returning to the country. Through the Emergency Decree No. 23-2019, until December 16, 2022, is extended the tax benefit granted to migrant Peruvians returning to the country (approved by Law No. 30001) consisting of the exemption of payment of all taxes on the internment in the country of the following goods: household goods up to $50,000.00; a motor vehicle for a maximum of $30,000.00, instruments, machinery, equipment, capital goods and other goods that they use in the performance of their work, profession, trade or business activity up to $350,000.00.

The placement request shall be submitted within a maximum period of ninety (90) business days before or after the date of entry into the country, before the competent authority outside or inside the country.

Various regulatory modifications related to Income Tax.-

Indirect Credit:

The Supreme Decree No. 369-2019-EF modifies article 88 of the Regulations of the Income Tax Law (LIR). Thus, as of January 1, 2020:

i) Taxes paid abroad must be converted into national currency using the weighted average exchange rate of purchase corresponding to December 31 of the year in which the income is allocated.

ii) Dividends or profits distributed will be understood as those that the first level non-domiciled company distributes in cash or in kind, and this distribution will occur when these dividends have been paid or made available to the Peruvian company.

iii) When SUNAT requires it, the Peruvian legal entity must prove the following:

  • Its participation in the first and second level companies: For this purpose, this shall present a document of certain date or any other certified document that includes, at least, the denomination or company name of the owner of the shares or of the holder of the ADR´s and GDR’s; the percentage of participation in the non-domiciled company and the type of shares that it owns.
  • The distribution of dividends or profits by first and second level non-domiciled companies: Through distribution agreements and proof of deposits or transfers to bank accounts or other documents that prove their effective distribution when it is in kind.

iv) To be entitled to the deduction of the indirect credit, the Peruvian company must inform SUNAT of the dividends or profits distributed by the first and second level non-domiciled companies that it has received since January 1, 2019, as well as the shareholding that could have at SUNAT.

  • Additional deduction for expenses in scientific research, development and technological innovation projects:

By means of Supreme Decrees No. 405-2019-EF and 406-2019-EF, the Regulation of Law No.30309, Law that promotes scientific research, development and technological innovation is adapted to the changes introduced by Emergency Decree No.010-2019 which were detailed in our Newsletter N° 91 – October 2019.

  • List of exported goods:

Through Supreme Decree N° 402-2019-EF, white zinc oxide is excluded from the list of goods with a known price in international, local or destination markets or that fix their prices taking as reference the prices of these markets identified by tariff items, provided in Annex 2 of the Regulation of the Income Tax Law.

  • Additional deduction of income from work:

The Supreme Decree No. 402-2019-EF establishes that the deduction of 15% of the amounts paid for accommodation, food and beverage services in hotels and restaurants included in division 55 of section H of the ISIC (Revision 3) and divisions 55 and 56 of Section I of ISIC (Revision 4), provided for in subsection d) of Article 26-A of the LIR Regulations will be subject to support on payment vouchers whose issuer have registered in the  Single Taxpayer Registration as principal or secondary economic entity, only ISICs included in the aforementioned divisions.

The Regulation of the Ninth Title – Guarantees and Investment Promotion Measures-of the General Mining Law- is modified. By means of Supreme Decree N ° 21-2019-EM, various aspects related to the procedure to access the contracts of stability, the subsequent accreditation of compliance with investments, the rules in case of common expenses to stabilized and non-stabilized activities, as well as the approval of additional investments covered by stability for the remaining term of the contract.

The new Stability Contract Model (15 years) under the General Mining Law is approved.- Supreme Decree No.22-2019-EM approves the model of the Contract of Guarantees and Investment Promotion Measures referred to in Articles 83°-A and 83°-B introduced by Laws Nos. 30230 and 30396 in the Consolidated Text of the General Mining Law which grants for fifteen (15) years the guarantees of administrative, exchange and tax stability as well as the right to keep the accounting in foreign currency and apply the global depreciation rates of up to 20% for furniture and 5% for buildings.

Deadlines for compliance with tax obligations are established.– By means of Superintendence Resolution No.269-2019/SUNAT, the schedule for compliance with monthly tax obligations and the maximum delay dates of the sales and income register and of purchases taken electronically corresponding to the year 2020.

Provisions are made for the presentation of the Annual Affidavit of Income Tax.- By means of the Superintendence Resolution No. 271-2019/SUNAT, provisions (term, form, place) and forms for the Annual Affidavit of Income Tax are approved. Income and Tax on Financial Transactions for taxable year 2019.

The ITU is set for the year 2020.- Through the Supreme Decree No. 380-2019-EF, the ITU is set for the year 2020 in the sum of S/. 4,300.00.

NATIONAL CURRENT ISSUES

Disposal of property agreed in installments.- In Report N°160-2019-SUNAT/7T0000, the sale of a property that is not a dwelling and is carried out by a natural person who does not carry out business activity is analyzed through a buying and selling contract with property agreement for retention under the provisions of article 1583° of the Civil Code and, in which it is agreed that the payment of the price would be made in 6 installments finding the income subject to the second category Income Tax. In this regard, it is noted that:

i) The seller must pay this tax the following month that in which each installment is collected, unless the amount of the collected fees is less than the computable cost of the property in question whose amount is obtained by applying the coefficient determined to be in accordance with the provisions of subsection c) of article 11 of the Regulations of the LIR.

ii) The notary must demand the presentation of the proof of payment of the Second Category Income Tax at the time of writing the buying and selling contract with a property agreement for retention, unless the amount of the fee(s) received at that date is less than the computable cost corresponding to this.

Regulations provided for the deduction of pre-operational expenses.- In Report N°194-2019-SUNAT/7T0000 it is concluded that the regulations of subsection g) of article 37° of the LIR are applicable to the accrued financing commissions during the pre-operative stage. Likewise, it is noted that the commissions that are an integral part of the effective interest of the financial instrument in question and the commissions related to a significant act, referred to in Report N° 030-2017/SUNAT/7T0000 accrued during the pre-stage-operative, they will be part of the expenses of this phase and, at the taxpayer’s option, they will be deducted in the first year in which the production or exploitation of the activities of the company begins or will be amortized proportionally within a maximum period of 10 years from that such production or exploitation began.

Deduction of per diem expenses.- Through Report N° 181-2019-SUNAT/7T0000, SUNAT establishes that travel and per diem expenses for accommodation, food and mobility assumed by a Peruvian company, on the occasion of the service provided by a person natural domiciled with who does not have employment relationship and whose remuneration constitutes fourth category income:

i) They are not included in subsection r) of article 37° of the LIR.

ii) They are deductible for the company in accordance with subsection v) of article 37° of the LIR, as long as they have not been reimbursed by the service provider whenever comply with the principle of causality and as long as the expense is not found limited or prohibited by law.

CASE LAW

Review of prescribed periods (Cassation No.3297-2016) .- The Permanent Constitutional and Social Law Chamber has established that the Tax Administration is empowered to correct errors from previous periods, even if they are prescribed, not in order to determine and collect tax obligations derived from them which could violate the prescription; but, so that the amount obtained from the tax to be paid for a period not prescribed reflects the correct amount of the obligation.

Road maintenance expenses (RTF N° 3244-9-2019).- The Tax Administration objected the tax credit linked to road maintenance expenses since they were not linked to the taxpayer’s activity. In this regard, the Tax Court revoked the objection stating that these expenses do comply with the Causality Principle, as they are incurred in order that income generating activities are carried out regularly and guaranteeing their continuity, since If the road is in poor condition, it would be difficult to transfer the goods that it acquires, the personnel that works and the products that it commercializes, among others, which would prevent the normal development of the taxpayer’s business, that is, the expenses for maintenance of roads are indispensable .

Deduction of financial expenses (RTF N° 4373-9-2018).- The Tax Administration objected interest expenses on loans incurred by the taxpayer to purchase two lands, since the purchase of one of them was not made. The Tax Court affirmed that for the deduction of financial expenses caused by the purchase of land, it is not necessary that they generate income, but that they are potentially suitable to produce them; and since SUNAT had not distorted this circumstance, the Court concluded that the objection was not properly supported and proceeded to lift it.