Peru has published a tax regulation clarifying the earlier General Anti Avoidance Rule (GAAR) regulation. The GAAR empowers the Peruvian tax administration to prevent tax avoidance, including tax avoidance involving cross-border transactions.
Prior to the issuance of the new guidance, GAAR as regulated under legislative decree 1422 (dated on 13 September 2018), will apply for tax audits reviewing facts, acts and situations from 19 July 2012 and thereafter legal representatives will be jointly liable for the tax debt when the GAAR is applied, provided those legal representatives have collaborated with the design or implementation of the acts challenged by the Peruvian Tax Authority using the GAAR.
The Peruvian Tax Authority, to apply the GAAR in tax audits, must follow a special procedure that requires the auditor to send the case to the Revision Committee, which will notify the taxpayer of a hearing.
The new regulation provides clarification for the meaning of Economía de opción. Under the new guidance, the term is defined as the reduction or postponement, partially or totally, of the income tax.
Even though the meaning is close to tax avoidance, under the new 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 this regard, 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 noncooperative 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. The Peruvian commission will remain as a competent stakeholder to review any tax audit related to tax avoidance and the correct application of the GAAR.
The review will include the taxpayer´s position on transactions deemed tax avoidance by the Peruvian tax administration. Its opinion is not subject to appeal. The new tax audit procedure related to tax avoidance entered into force on May 7.