Tax Havens within the peruvian regulatory framework

A tax haven, according to the OECD, is a country or territory that meets certain characteristics that may facilitate tax elusion, tax evasion, and other harmful financial practices. Along these, tax entities worldwide usually see tax havens as unfair competition territories for investment and taxation. Therefore, these criteria must be understood to designate certain countries within the already famous lists of tax havens or non-cooperative jurisdictions.

Herein, we will discuss the Peruvian regulations regarding tax havens and the significance for the country in identifying these jurisdictions.

Tax Haven Significance for Tax Authorities Worldwide

Tax havens must be known due to large amounts of profit shifting from the different jurisdictions to these countries. Thus, some sources estimated that, in 2018, 40% of companies’ profits ended up in tax havens. On the other hand, in October 2023, through auditing actions, the SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria – National Superintendence of Customs and Tax Administration) detected tax non-compliance regarding international transactions appraised for an amount greater than five million soles.

Due to the above and upon awareness of the effects of the interaction with the so-called tax havens, the tax authority may initiate audit procedures for companies, as well as apply rules for correct compliance and taxation in Peru.

Peruvian Definition of Tax Havens

The tax havens concept is contained in Chapter XVI of the Income Tax Law Regulations, which was last updated with the Supreme Decree No. 340-2018-EF, published on 30.12.2018. Herein, aspects regarding tax havens are modified to comply with the procedures for Peru to join the OECD, such as the change of the name to “Non-Cooperative, Low, or No Taxation Territories” or “Preferential Regimes.”

According to Article 86 of the regulation, the definition given to these non-cooperating, low, or no taxation territories and preferential tax regimes is as follows:

“1) non-cooperating, low, or no taxation countries or territories are those indicated in Annex 1 of these regulations.

By Supreme Decree, other countries or territories may be included in Annex 1 whenever they comply with any of the following criteria:

1. Absence of a Tax Information Exchange Agreement or Double Taxation Avoidance Agreement with Peru in force, including an information exchange clause; or if existing, not complying with the information exchange with Peru or that such exchange is limited by the application of its legal norms or administrative practices.
2. Absence of transparency at the legal, regulatory, or administrative operation level.
3. c) A zero percent (0%) corporate income tax rate or less than sixty percent (60%) of the rate that would apply in Peru on corporate income under the general regime, regardless of the denomination given to this tax, according to Article 87.

2) Preferential tax regimes are those regimes meeting two of the following criteria:

1. a) Absence of a Tax Information Exchange Agreement or Double Taxation Avoidance Agreement in force in the country or territory of the tax regime, including an information exchange clause; or if existing, not complying with the information exchange with Peru or such exchange is limited to apply its legal rules or administrative practices, regarding such tax regime.
2. b) Absence in the country or territory of the tax regime of transparency at the legal, regulatory, or administrative operation level regarding such regime.
3. c) A zero percent (0%) or less than sixty percent (60%) of the rate applicable in Peru on income of the same nature to domiciled entities, regardless of the denomination given to this tax, on income, revenues, or profits subject to the tax regime, according to Article 87.
4. d) The explicit or implicit exclusion of residents of the country or territory of such tax regime or the explicit or implicit prohibition of the beneficiaries of such regime from operating in the domestic market.
5. e) The OECD classification as pernicious or potentially pernicious regimes for complying with subparagraph (iii) of the fourth paragraph of Article 44 (m) of the Law, even when the country or territory of the regime is in the process of eliminating or modifying them.”

Transfer Pricing Regulations on Tax Havens

Article 32°-A. of the Income Tax Law states that the Transfer Pricing rules shall apply to transactions carried out by taxpayers with their related parties or those carried out from, to, or through low or no-taxation countries or territories. Conversely, the amount agreed upon by the parties shall only be adjusted to the amount resulting from the application of the Transfer Pricing rules in the cases foreseen in paragraph c) hereof.

In this regard, identifying tax havens is useful for the Transfer Pricing analysis regarding companies that, even without related party transactions, may have transactions with companies located in such countries.

Tax Haven List in Peru

In Annex 1 incorporated by Supreme Decree No. 340-2018-EF, published on 12.30.2018.:

Conclusion

Finally, knowing and understanding the dynamics of tax havens is critical to safeguarding the financial and fiscal interests of a nation, promoting tax equality, facing tax evasion and elusion, and fostering financial transparency locally and globally. This knowledge helps to strengthen the integrity of the tax system and ensure fair and equitable compliance of all taxpayers with their tax responsibilities.