PERU Law and Practice Contributed by: Alvaro Echeandía, Alfred Kossuth Wieland, Pilar Santillán Meza and Rodrigo Varillas Cueto, Thorne, Echeandia & Lema Abogados
The deduction is limited to 30% of the previous fiscal year’s EBITDA (earnings before interest, taxes, depreciation and amortisation). The non- deductible excess can be carried over for the next four years. The limit of 30% does not apply to certain enti - ties such as financial and insurance companies, to taxpayers with net income up to 2,500 UIT, and to taxpayers involved in public procurement and the interests generated from that relation - ship, among other exceptions. 5.6 Transfer Pricing The Peruvian Income Tax Law sets forth the transfer pricing (TP) rules that govern transac - tions between related parties. TP rules also apply to transactions with parties located in countries or territories with low- or no-income tax – the so-called “tax havens” – and with persons or entities that obtain income subject to preferential tax regimes. TP adjustments will apply only in case of a tax prejudice to Peru. Peruvian law establishes the methods and procedures for determining the TP value. The OECD TP Guidelines are a supple - mentary source. Annual TP reporting obligations (local report, master file report, and country by country report) are mandatory if certain condi - tions are met. 5.7 Anti-Evasion Rules Peruvian tax law includes several anti-avoidance rules, empowering the tax authority to demand tax payments or reduce credits or losses upon detecting tax avoidance. In this context, tax avoidance refers to actions that either wholly or partially prevent a taxable event, reduce the tax - able base or the tax debt, or improperly generate tax credits, balances or losses through actions that (i) are artificial or unsuitable for achieving
their intended purposes, and (ii) whose legal or economic effects, putting aside the tax bene - fits, are equivalent or similar to those achievable through proper or customary acts. Specific anti-avoidance rules may apply in M&A transactions, cross-border loans, intercompany loans and tax haven expenses, among others. Although tax planning is legal in Peru, it does not involve tax avoidance. As an “option econ - omy”, it is the legal system itself that offers the taxpayer different options by means of which it can carry out its business activities in the most cost-effective way while properly fulfilling its tax Through Ministerial Resolution No 005-2006- EF/15, published on 15 January 2006, the Min - istry of Economy and Finance of Peru approved the Tariff Policy Guidelines. These guidelines indicate that there are two basic areas of tar - iff policy over which the Ministry of Economy and Finance has jurisdiction. One is unilateral, whereby Peru can sovereignly decide to modify its tariff structure without negotiating with any other country (most favoured nation tariff). The other is related to trade agreements involving tariff reductions, which are mutually negoti - ated with trading partners. In both cases, any regulation associated with tariff policy must be approved and endorsed by the Ministry of Economy and Finance. According to the state’s Political Constitution, tariff regulation is the responsibility of the Executive Branch, specifi - cally the President of the Republic (Article 118, Section 20 of the Peruvian Political Constitu - tion) through supreme decrees (Article 74 of the Peruvian Political Constitution). However, opera - tionally, this responsibility falls to the Ministry of Economy and Finance. obligations. 5.8 Tariffs
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