NEWS
PERU APPROVES EXPANSION OF LAS BAMBAS COPPER MINE PERU APPROVES EXPANSION OF LAS BAMBAS COPPER MINE HOSPITAL PROJECTS OF THE SOCIAL HEALTH INSURANCE OF PERU (ESSALUD) CAPTURE THE INTEREST OF INVESTORS STREAMLINE PROCESSES TO APPROVE ENVIRONMENTAL IMPACT STUDIES IN INVESTMENT PROJECTS SINGAPORE BECOMES THE FIRST PARTNER OF THE PACIFIC ALLIANCE CASTILLO SAYS THAT THE PERUVIAN GOVERNMENT IS COMMITTED TO HONORING OBLIGATIONS TO JOIN THE OECD SUSTAINABILITY OF PUBLIC FINANCES REQUIRES MORE THAN EVER PRIVATE INVESTMENT PUBLIC INVESTMENT WILL CONTRIBUTE TO THE ADVANCEMENT OF THE ECONOMY THIS YEAR CASTILLO REITERATES HIS INVITATION TO BUSINESSMEN TO INVEST IN PERU IN DAVOS 2022 JULIO VELARDE IS ELECTED AS CENTRAL BANKER OF THE AMERICAS 2022 BY FINANCIAL TIMES PPP PROJECT PORTFOLIO WAS PRESENTED TO CANADIAN INVESTORS THE PROMOTION OF PRIVATE INVESTMENT IN THE COUNTRY IS URGENT PROINVERSION PROMOTES PPP PROJECTS FOR US$ 6,300 MILLION TO INVESTORS FROM SINGAPORE, KOREA AND AUST INVESTMENT IN INDUSTRIAL SECTOR WILL GROW 26.9% THIS YEAR IN PERU THE PORT OF CHANCAY WILL HAVE A GREAT REGIONAL IMPACT AND WILL BE A HUB OF THE SOUTH PACIFIC MOODY'S: EXPORT SECTOR WILL BE THE ENGINE OF REACTIVATION OF THE PERUVIAN ECONOMY PERU RECORDED SURPLUS OF US$ 3,986 MILLION MEF RAISES PERU'S GROWTH PROJECTION TO 13% JOINING THE OECD IS A POLITICAL WILL OF THE STATE MEF AND ECLAC COORDINATE ON LITHIUM INVESTMENTS NET INTERNATIONAL RESERVES REACH US$ 75,358 MILLION AS OF OCTOBER 27 GOVERNMENT PLACED BONDS AMOUNTING US$ 4,000 MILLION IN THE INTERNATIONAL MARKET BCR: PUBLIC INVESTMENT WILL GROW 20% THIS YEAR AND 4.5% IN 2022 PERU ANNOUNCES PUBLIC TENDER OF TWO ELECTRICAL PROJECTS IN THE NORTH OF THE COUNTRY THROUGH PPP CASTILLO RATIFIES PERU'S INTEREST IN JOINING THE OECD CONFIRMED: JULIO VELARDE WILL REMAIN IN FRONT OF THE CENTRAL RESERVE BANK (BCR) FOR FIVE MORE YEARS PERSPECTIVES ON PERU'S GDP ARE FAVORABLE GLOBAL INVESTORS INTERESTED IN INFRASTRUCTURE WORKS IN PERU BCR: PRIVATE INVESTMENT WILL REACH US $ 41,700 MILLION THIS YEAR PROINVERSION PROMOTES TO INVESTORS ESSALUD HOSPITAL PROJECTS THE GOVERNMENT WILL ACCELERATE 52 INVESTMENT PROJECTS FOR S/ 114,000 MILLION The state will promote large Infrastructure Projects Peru in the Pacific Alliance San Juan de Marcona Port Project will be awarded next year Peru would lead regional growth There are 13 interested companies in participating in the tender for the Ancon Industrial Park Peru attracts great investments Gore Ancash promotes work for taxes projects for more than S/. 600 million Minister Francke met with the President of BCRP to coordinate economic and monetary policies President Pedro Castillo swears in his first Cabinet of Ministers Peru is on the right track in Fiscal Matters LT Puerto Maldonado-Iberia and Chira Valley Substation will boost Madre de Dios and Piura Arequipa: MEF approves addendum 13 to Majes Siguas II Project Agreement ratification gets the Go-ahead Mining exports already exceed Pre-pandemic levels MEF announces the unlock of the Majes Siguas Project Peru´s economic recovery is the highest in the region Foreign investment in Latin America will reach prepandemic levels in 2023 CCL: Peru has 921 investment megaprojects We seek to sign our first contract in Ports IMF: Peru Libre and Fuerza Popular in favor of maintaining a Macroeconomic soundness policy Agri Exporters seek to position Peruvian Organic Coffee in South Korea The rate of awarding of projects under the form of works for taxes returned the level prior to the p FITCH considers that Peruvian Companies maintain proper liquidity positions Mining investment totaled US$ 1,298 millon More than 1,561 new rural towns will have 4G mobile telephone and internet services LA LIBERTAD: THE MODERNIZATION OF THE PORT OF SALAVERRY IS 80% COMPLETE TOQUEPALA IS TAKING THE FIRST STEP TO ENTER 5G FOREIGN-OWNED COMPANY REINVESTMENT AMOUNTED TO US$ 2,310 MILLION BCR: RECOVERY OF PRIVATE INVESTMENT GDP TO GROW 34.4% IN THE SECOND QUARTER MOODY'S AGENCY ASSURES PERU'S A3 RATING US$ 340 MILLION IN LOANS FOR ROAD INFRASTRUCTURE PROINVERSIÓN CALLS FOR INTERNATIONAL BIDDING FOR PUBLIC TELECOMMUNICATIONS SERVICES ADDENDUM TO THE MUELLE NORTE CONCESSION WOULD ALLOW INVESTMENT OF US$ 1,050 MILLION FROM APMT. AMERICAN LITHIUM WILL PRIORITIZE LITHIUM PROJECT OVER URANIUM IN PUNO MEF KEPT 10% PROJECTED GROWTH FOR PERUVIAN ECONOMY FOR THIS YEAR RECORD IN THE EXECUTION OF PUBLIC INVESTMENT EUROPEAN UNION (EU) WILL SUPPORT TRANSPORTATION IMPROVEMENT COPPER NEARS 10-YEAR HIGH NATURAL RESOURCES MUST BE ENHANCED MONETARY FUND PROPOSES TO STRENGTHEN COUNTRIES' FISCAL RESPONSES TO THE CRISIS PROINVERSIÓN WILL RECEIVE BIDS FROM THE PRIVATE SECTOR FOR FOUR SANITATION PROJECTS SOUTHERN MINING CLUSTER WOULD ATTRACT US$ 14 BILLION IN INVESTMENTS BRITISH EMBASSY PRESENTS THREE CLIMATE ACTION PROJECTS TO BE IMPLEMENTED IN PERU PUBLIC INVESTMENT MARKS A RECORD RESULT IN THE FIRST QUARTER WB IMPROVES PERUVIAN GROWTH FORECAST FOR 2021 THE NEW CENTRAL HIGHWAY WILL BE CONNECTED WITH THE LONGITUDINAL DE LA SIERRA HIGHWAY PERU WILL HAVE THE LARGEST GDP EXPANSION IN SOUTH AMERICA THIS YEAR PERU RANKS SIXTH IN SOUTH AMERICA AS THE "MOST PREPARED" FOR STATE-OF-THE-ART TECHNOLOGIES A GUIDE TO DRAW INVESTMENT IN ENERGY PROJECTS IS PRESENTED LITHIUM ALSO FOUND IN CUSCO ANCON INDUSTRIAL PARK WILL HAVE 1,338 HECTARES FOR INDUSTRIAL, COMMERCIAL AND LOGISTICAL DEVELOPMENT PROJECTS FOR MORE THAN US$ 6 BILLION DRAW THE ATTENTION OF SPANISH INVESTORS THE GOVERNMENT PLACED BONDS AMOUNTING TO US$ 4,000 MILLION IN THE INTERNATIONAL MARKET PUBLIC INVESTMENT REACHED AN EXECUTION RECORD IN FEBRUARY CLARO AND ENTEL WILL DEPLOY 5G TECHNOLOGY FOR FIXED WIRELESS INTERNET COLOMBIA BETS ON INFRASTRUCTURE AND ENERGY PROJECTS AMOUNTING TO MORE THAN US$6 BILLION IN PERU CHINA WILL FURTHER ITS INVESTMENT IN PERU IMF INCREASES THE FORECASTED GDP GROWTH TO 9% IN 2021 MINING INVESTMENTS EXCEEDED EXPECTATIONS PORT MODERNIZATION INCLUDES NINE PROJECTS PROINVERSIÓN PROMOTES INFRASTRUCTURE PROJECTS TO EUROPEAN AND NORTH AMERICAN INVESTORS MEF MAINTAINS A 10% GROWTH RATE FOR 2021 PROINVERSIÓN HAS JOINED THE WORLD ASSOCIATION OF PPP UNITS AND PROFESSIONALS ELECTRICITY SECTOR PLANS AMOUNTING TO US$ 6,025 MILLION PROINVERSIÓN EXPECTS TO AWARD PROJECTS AMOUNTING TO US$ 2.5 BILLION THIS YEAR PROINVERSIÓN CALLS AN INTERNATIONAL BIDDING FOR THE ANCÓN INDUSTRIAL PARK PROJECT PERU WILL LEAD INVESTMENT IN THE NEXT THREE YEARS PROINVERSIÓN CALLS AN INTERNATIONAL COMPETITIVE BIDDING FOR THE ANCÓN INDUSTRIAL PARK PROJECT THE MTC WILL PROMOTE INVESTMENTS AMOUNTING S/ 1580 MILLION IN DIGITAL CONNECTIVITY PRIVATE INVESTMENT WILL GROW 17.5% THANKS TO MORE THAN 30 PROJECTS WB: PERUVIAN ECONOMY WILL GROW 7.6% IN 2021 PERU IS ONE OF THE COUNTRIES WITH THE GREATEST MACROECONOMIC STRENGTH

AGREEMENT BETWEEN PERU AND JAPAN TO AVOID DOUBLE TAXATION ENTERED INTO FORCE: WHAT DOES THIS IMPLY?

January 28, 2022 - Lima.- Specialists pointed out that the agreement between the two countries establishes a limit to tax the passive income obtained by a Japanese company in Peru.

On January 1 of this year, the agreement between Peru and Japan came into force to avoid double taxation with respect to the tax on income obtained and for the amounts paid, those that are credited to an account or are accounted for as an expense.

What does the agreement signed between the two countries imply? According to the specialists consulted by this newspaper, these agreements seek to avoid that tax costs are doubly applied to companies from a certain country that conduct business in the other nation, in this case between Peru and Japan. That is, it seeks to mitigate or reduce the taxes generated by these companies in the other country.

"What these types of agreements do is try to reduce or avoid generating duplicate taxes, that the same fact is taxed in a duplicate way in two or more countries, and that is why such treaties are concluded," explained Fernando Núñez, lawyer and partner of Estudio Hernández. 

In that sense, Roberto Cores, Partner of International Tax and Transaction Services of EY Peru, said that agreements to avoid double taxation distinguish the types of active or business income and passive income. It is in the latter where the benefits are obtained for Peruvian and Japanese companies that have business in the other country.

"With regard to active income, if there is a Japanese company that operates in Peru directly, obviously Peru has the right to tax income without limitation, but it happens that when a Japanese company obtains some type of passive income, essentially interest, dividends, royalties or capital gains, a maximum limit is established with respect to which Peru can apply the tax," he indicated.

Reduction
According to the agreement, maximum percentages are established to tax passive income in the case of royalties, dividends and interest.

In the case of royalties, the agreement between the two countries indicates that the withholding tax for this payment is up to 15%. This figure is half of what Peru currently retains for royalties (30%), according to specialists.

"In ordinary situations, a royalty, which is this payment that is made for the use of an intellectual property, Peru can withhold, according to Peruvian law, up to 30%. But, under the agreement, Peru decides to tax up to 15%, so that Japan could tax that differential. Japan could establish a higher tax," Cores explained.

On dividends and interest, the payment of taxes made by foreign companies in Peru will be up to 10%. "If I receive a loan from a Japanese company, from my parent or shareholder, I will have to pay interest taxes of 30% as well, but according to the treaty, that rate of 30% is reduced to 10%, precisely to avoid generating very high taxes in Peru that cannot be offset in Japan,"  núñez points out.

In addition, capital gains will not be taxed in Peru, Cores explained, except in the case where the value of shares within a national company that is sold by a Japanese company is greater than 20% or if they derive from real estate.

"If one has less than 20% or the value of the company does not derive essentially from real estate, [capital gains] would not be taxed in Peru. [...] By setting it at 20%, what it says is that, if a Japanese company is going to sell the total of its investment in Peru, it will probably not have any profit," he said.

In that sense, Cores specifies that the benefit of the agreement will be notorious for royalty taxation. For dividends, he explained that national legislation allows taxation of a %, while, for interest, the legislation allows to withhold between 4.99% and 30%.

Competitiveness
Both Core and Núñez pointed out that the country does not have a large number of agreements to avoid double taxation.

And it is that Peru, explains the EY specialist, has agreements of this type under two models. Under the OECD model, in which the power of taxation is distributed, Peru has agreements with Brazil and Chile in South America, Mexico and Canada in North America, Portugal and Switzerland in Europe, and with Korea and Japan in Asia. In addition, under decision model 578 -of exclusive taxation where it is only taxed in the country of the source-, Peru has an agreement to avoid double taxation with the governments of the Andean pact, which are Bolivia, Colombia and Ecuador.

That is why both specialists considered that, in this aspect of agreements to avoid double taxation, Peru is at a disadvantage compared to countries such as Colombia, Chile, Mexico or Ecuador.

"Peru should return to the path of concluding this type of agreement, because in the end they are beneficial for the country. They generate legal certainty, greater private investment, and so on. It should be a Government policy to sign these types of treaties with our main trading partners," Núñez said.

"The agreements give series of guarantees in terms of tax treatment and put certain limits on what can be taxed. Although certain limits are imposed on what Peru can tax on certain incomes, the benefit is greater when establishing this limitation because greater foreign investment can be generated," Cores added.

More information
The agreement to avoid double taxation between Peru and Japan was signed in November 2019 and entered into force on January 29, 2021. According to the agreement, the entry into force was stipulated to take place on the first day of January, of the following year of implementation of the treaty.

Source: El Comercio

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