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07 January 2022 Peru publishes thin capitalization regulations The regulations establish how to determine EBITDA when a taxpayer has no net income or has losses that are equal to or higher than net income. They also establish rules for reorganizations and carrying forward disallowed interest expense. Peru published Supreme Decree 402-2021-EF, which contains the regulations for the thin capitalization rules. The Supreme Decree was published on 30 December 2021. The new thin capitalization rules, effective since 1 January 2021, limit the "net interest" deduction for corporate income tax purposes to the extent the "net interest" exceeds 30% of EBITDA (i.e., net income after offsetting losses plus net interest, depreciation and amortization) of the previous year. "Net interest" is the difference between interest expense and interest income in a tax year. When taxpayers do not have net income in a tax year or their losses are equal to or more than their net income, the Supreme Decree establishes that the EBITDA will be the sum of net interest, depreciation and amortization. In other words, net income (or negative net income) is not considered in these cases. Taxpayers may carry forward net interest not deductible in the tax year because it exceeds 30% of the EBITDA for four tax years. Taxpayers should add the nondeductible net interest to the net interest of the following years and only the part not exceeding 30% of the EBITDA will be deductible. For purposes of the deduction, taxpayers must consider the net interest carried forward from the previous tax year first. If a new company is incorporated as a result of a reorganization, the new company must take into account the EBITDA for the year in which the reorganization takes place. If a company enters into a reorganization and a new company does not result from it, the company must take into account the EBITDA for the previous tax year.
Document ID: 2022-5021 |