According to law, the fiscal year is the calendar year.
The filing deadline for the income tax return is generally the first week of April. The system is one of self-assessment, but the tax return filed with the tax authorities is subject to review.
Payment of tax
Income tax payments are due in 12 monthly instalments (advanced payments). The due date for the final income tax payment for a year is generally the first week of April.
The estimated payment calculation system has been established, and the amount of the estimated payment will be the greater of the result of multiplying the net revenue of the month by (i) 1.5% or (ii) the applicable coefficient. The coefficient is calculated by dividing the income generated in the previous fiscal year by the income tax that was determined.
According to the Peruvian tax legislation, the SUNAT applies a moratorium interest rate of 0.04% for each delayed day for payment of tax debts (1.2% per month). However, as of 1 April 2020 onwards, the SUNAT will apply a moratorium interest rate of 0.03% for each delayed day (1% per month). As of 1 April, 2021, the monthly moratorium interest rate is 0.9%.
The National Superintendency of Customs and Tax Administration (SUNAT) is responsible for administering all of the aforementioned taxes (income tax, VAT, etc.). Companies resident in Peru must be registered with the tax administration (Taxpayer’s Registry).
The Tax Court is a specialised administrative tribunal, which depends on the Ministry of Economy and Finance, but is otherwise autonomous regarding its specific functions. Its mission is to rule over tax controversies that may arise between the tax administration and the taxpayers, by interpreting and applying the corresponding tax legislation, issuing mandatory observance jurisprudence, and establishing homogenous criteria that continue to support the progress of the tax system.
Finally, taxpayers are entitled to file an appeal before the Judiciary (Court) against resolutions issued by the Tax Court, but payment of the tax debt must be performed or guarantees must be provided.
Tax audit process
The tax audit performed by the SUNAT includes all the aspects of the tax and period being subject to review. The tax audit is formal, and the process is fully regulated.
The SUNAT is also able to conduct partial audits of limited scope.
Statute of limitations
Pursuant to the Peruvian tax legislation, the SUNAT is entitled to audit taxpayers in order to assess their tax liabilities, request the payment of any due tax, and assess any applicable penalty for up to (i) four years from 1 January of the year following the date the corresponding tax return had to be filed, (ii) six years to the extent that the corresponding tax return was not filed, and (iii) ten years when the tax withheld by the taxpayer has not been paid to the SUNAT.
Topics of focus for tax authorities
The SUNAT mainly focuses on the following topics:
- Deduction of expenses, including cost share expenses.
- Market value of transactions between related parties.
- Peruvian source income WHT.
- Income tax advance payments.
General Anti-avoidance Rule (GAAR)
The GAAR (provision XVI of the Tax Code) allows the SUNAT to consider the acts, situations, and economic activities performed, established, or desired by the taxpayers in order to determine the real nature of the taxable event. To this extent, provision XVI establishes that when tax evasion is detected, the SUNAT is entitled to collect the tax debt and fines; reduce the amount of balances due, NOLs, or tax credits; or eliminate any tax advantage, without prejudice, to recover any amount that was wrongfully reimbursed.
While interpreting the tax legislation, substance should be selected over a legal form. The fact that a taxpayer's transactions are legal does not imply that they are acceptable with reference to the underlying meaning embedded in the tax rules. Thus, where there is no business purpose except to obtain a tax benefit, the SUNAT should challenge such transactions as artificial and apply the corresponding tax rules.
In 2014, provision XVI was partially suspended until regulations that would establish their scope and application were enacted by the Peruvian government. Until this day, the tax administration was only empowered to disregard simulated transactions.
However, Legislative Decree 1422 was enacted on 13 September 2018, establishing that the SUNAT is authorised to review the operations carried out since the publication of provision XVI once the regulations are published. Likewise, the presumption of fraudulent behaviour, serious negligence, or abuse of powers was incorporated to the legal representatives when they collaborate with the design, approval, or execution of situations that could be subject to the GAAR.
At the same time, it was established as a non-delegable faculty of the Board of Directors to approve the operations carried out by the company in the framework of tax planning. In summary, directors can be held responsible if in a board meeting they approve acts, situations, or economic relations that prevent the correct payment of taxes in question or are aimed at obtaining a tax advantage.
This, nonetheless, has been challenged by the Peruvian Congress through a report submitted on 9 November 2018, requesting the repeal of the Board of Directors obligation to communicate operations related to provision XVI, as well as the SUNAT's faculty to review operations carried out upon the approval of the regulation that lifts the aforementioned suspension, and not (as Legislative Decree 1422 established) since 2012.
This report was approved on 4 December 2018, and it is possible that in the near future the obligations of the Board of Directors will be repealed with respect to provision XVI, as well as the retroactive application of the SUNAT's control power.
On 6 May 2019, parameters for the application of the GAAR contained in Norm XVI were approved, lifting the partial suspension of its effects as per the 2014 ruling.