Peruvian source net losses cannot be offset against foreign source income

November 8, 2021

On October 21st, Report No. 000084-2021-SUNAT/7T0000 was issued to resolve an institutional consultation on the meaning and scope of the tax regulations, specifically on the following:

1. Consultation

If a Peruvian company has net foreign source losses accumulated from previous periods or generated in the same fiscal year, can it offset them against its foreign source income?

2. Analysis

According to Article 51 of the Income Tax Law, taxpayers domiciled in the country shall add and offset among themselves the results of their foreign income-producing sources. However, only if such operations result in a net income, the same shall be added to the net labor income or 

to the net corporate income of Peruvian source, as applicable, based on Articles 49 and 50 of said law. 

In addition, in no case will the total net foreign source loss be computed, which is not offsettable to determine the tax.

On the other hand, the Income Tax Law Regulations have expressly provided that the net income from foreign sources obtained by legal entities, among others, will be added not only to the net income from Peruvian sources of the third category but also to the net loss from Peruvian sources, which is also of the same category. Nevertheless, it must be specified that the net income from the Peruvian source and the net loss from the Peruvian source are only those corresponding to the same taxable year to which the net income from the foreign source in question is imputed.

3. Explanation

However, Article 50 of the Income Tax Law establishes that the Peruvian income tax regulations provide as an exception to the independence principle of fiscal years the case of the total net loss of the third category of Peruvian source by allowing its offset against the net income of the third category of subsequent fiscal years, but it does not contemplate the possibility of applying such offset against the net income of foreign source obtained, among others, by legal entities in the referred subsequent fiscal years.

4. Conclusion

Consequently, the net foreign source income of the same year will be added to the net Peruvian source losses generated in the year that a Peruvian corporation may have, and the net Peruvian source losses of previous periods will not be offset against the net foreign source income of the year in question.

Source: SUNAT 08/11/21