Peru clarifies general anti-avoidance rule for cross-border transactions   

By Franz Salazar Anccasi, TPC Group, Peru

The Peruvian government on May 6 published tax regulations clarifying Peru’s general anti-avoidance rule (GAAR). The GAAR empowers the Peruvian tax administration to prevent tax avoidance, including tax avoidance involving cross-border transactions.

The new law, Decree Supreme 145-2019-EF, is the first guidance to provide a definition of “Economía de opción.”

Under the new guidance, the term is defined as the reduction or postponement, partially or totally, of the income tax. 

However, according to the guidance, Economía de opción is a permitted tax planning if it is an appropriate legal option and if the transaction has a substantial purpose other than tax savings.  

In that context, the Peruvian tax administration will start applying the concept of Economia de opcion as part of the new GAAR regulation to any cross-border transaction that lacks economic purpose, that involves noncooporative tax jurisdictions, or that involves allocations to zero- or low-tax countries, among others.

This new regulation applies to audits of all transactions, including transactions between related parties.

Under the new guidance, there is a Review Commission that remains competent to review any tax audit related to tax avoidance and the correct application of the GAAR.

The commission will review the taxpayer´s position on transactions deemed tax avoidance by the Peruvian tax administration. It´s opinion is not subject to appeal.

The new tax audit procedure related to tax avoidance entered into force on May 7.