Through Report No. 000072-2021-SUNAT/7T0000, the National Superintendence of Customs and Tax Administration resolved a series of doubts regarding the interest deduction limit referred to in paragraph a) of Article 37 of the Income Tax Law in force in fiscal years 2019 and 2020.
1. Inquiries
According to the above, the tax administration was asked the following questions:
- Does that limit apply to loans made in favor of consortia keeping separate accounts from those of their contracting parties, even though such consortia do not legally have a legal personality?
- If the answer to the above question is affirmative, what should be understood by net assets in the case of consortia keeping separate accounts from those of their contracting parties?
- In case a consortium keeping separate accounts from those of its contracting parties has entered into a loan agreement with a local bank (unrelated) until 9.13.2018, and the latter has made some payments to the consortium after that date. Will the interest deduction limit corresponding to such payments be regulated by the provisions of article 37 (a) of the Income Tax Law, as amended by article 3 of Legislative Decree No. 1424?
2. Analysis
Regarding the first point, article 445 of the LGS (Ley General de Sociedades – General Corporation Law) defines a consortium contract as an association of two or more persons to participate actively and directly in a certain business or enterprise to obtain an economic benefit, maintaining its own autonomy.
On the other hand, regarding the second question, it should be noted that article 65 of the Income Tax Law establishes the obligation to keep a minimum number of books and accounting records or complete accounting for taxpayers receiving third category income, depending on the annual gross income obtained.
In this regard, by keeping accounts independent from those of its members or contracting parties, the consortium must record all its transactions as a legal entity to determine income tax, being the consortia with independent accounting must apply the International Financial Reporting Standards to prepare the financial statements.
Concerning the third question, the only transitory complementary provision of Legislative Decree No. 1424 establishes that the text of paragraph a) of Article 37 of the Income Tax Law before the amendment made by the aforementioned legislative decree will apply to debts created or renewed up to September 13, 2018(6) until December 31, 2020.
3. Conclusions
After the analysis carried out, the tax institution determined the following based on each of the consultations:
- The limit for the deduction of interest referred to in paragraph a) of Article 37 of the Income Tax Law applies to loans made in favor of consortia keeping separate accounting records from those of their contracting parties.
- For income tax purposes, in the case of consortia keeping accounts independent from those of their contracting parties, the net equity is comprised of concepts included in the accounts of the “Equity” element of the General Corporate Chart of Accounts, which come from the assets assigned by the members of the consortium and the results generated by the consortium contract itself with independent accounting, as well as from the updates of the value of the equity.
- In the case that a consortium keeping separate accounting records from those of its contracting parties has entered into a loan agreement with a local bank (unrelated) until 9.13.2018, and the latter has made some payments to the consortium after that date, the interest deduction limit corresponding to such payments will be regulated until 12.31.2020 by the provisions of paragraph a) of article 37 of the Income Tax Law prior to the amendment established by article 3 of Legislative Decree No. 1424.
Source: SUNAT 03/09/21
