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January 31, 2022
Peruvian Tax Authority establishes guidelines for permanent establishments
The guidelines establish when a permanent establishment is triggered and when tangible and intangible assets are subject to tax.
In Ruling 111-2021-SUNAT/7T0000 (the Ruling), the Peruvian Tax Authority established guidelines for permanent establishments (PEs).
Under Legislative Decree 1424, a PE may be created when a nonresident renders services in Peruvian territory for the same project or a related project for more than 183 days in a 12-month period. Under the Ruling, a PE for services will be triggered if the 183-day period is completed after 1 January 2019 (effective date of Legislative Decree 1424), even if the calculation of time started before that date.
Reimbursements made by a PE to its nonresident parent for costs and expenses assumed by the nonresident parent will not be subject to withholding tax or value-added tax (VAT) because: (i) the reimbursement does not qualify as income for the nonresident parent; and (ii) the transaction does not qualify as the utilization of services rendered by a nonresident in Peruvian territory for VAT purposes. Therefore, the Ruling does not require the nonresident parent to issue an invoice to the PE.
If the nonresident parent transfers tangible assets to the PE in Peru for use in the PE’s economic activities, the transfer will be subject to income tax, provided the tangible assets are physically located in Peru. If the parent company transfers intangible assets, the transfer will be subject to income tax when the intangible assets are used in Peru. For VAT purposes, the transfer of tangible goods will be subject to 18% VAT when they are physically located in Peru. Intangibles will not be subject to VAT because they are not located in Peru (an intangible is considered located in Peru when the acquirer and transferor are Peruvian residents).
For additional information with respect to this Alert, please contact the following:
Ernst & Young Asesores S.C.R.L, Lima
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young Abogados, Latin America Business Center, Madrid
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific