In July 2012, through Legislative Decree No. 1121, the so-called Rule XVI or “General Anti-avoidance Rule” (NAG) was incorporated into the Tax Code, granting SUNAT new powers to “determine the true nature of the taxable event”.
In other words, SUNAT can reclassify operations when it detects that “artificial” or “improper” acts have been used in order to reduce the tax base, to totally or partially avoid the realization of the taxable event or to obtain balances or credits in favor, tax losses or credits through acts that must meet certain concurrent requirements which must be supported by the Tax Administration.
1. What is tax avoidance?
In Peruvian tax doctrine it is defined as the action of the taxpayer aimed at reducing or not paying their tax obligations, which is why it ends up altering the true nature of the taxable event, which generates a tax advantage of a patrimonial nature without complying with the requirements established by law.
2. What must SUNAT prove in order to apply this reclassification power?
As we mentioned in the introduction to this article, acts that are likely to be reclassified by SUNAT must meet certain concurrent requirements that SUNAT must be able to substantiate, these being the following:
- The acts carried out, whether individually or jointly, must be “artificial or improper” in order to achieve the result obtained.
- Their use must result in legal or economic effects other than tax savings, which are similar to those that would have been obtained with usual or proper acts.
On this second point, it is not questioned that there is tax saving (which may be legitimate), but that there must also be a valid business reason behind the operation. The rule seeks to distinguish between legitimate tax planning (economic choice) and artificial structures that only seek to avoid taxes.
3. Parameters for the application of the anti-avoidance rule
It is important to point out that this power is not unlimited. In the interest of having clear limits and guarantees, on May 6, 2019, Supreme Decree No. 145-2019-EF was published, establishing the parameters of substance and form for the application of Rule XVI.
Among the most relevant substantive parameters, it is established that the power of reclassification must be exercised with respect for the Constitution and fundamental rights, requiring adequate justification of both the facts and the normative interpretation.
Likewise, the classification of acts as “artificial” or “improper” implies a reasonable margin of discretion to determine the content of these legal concepts in each specific case, provided that it is not manifestly unreasonable.
With regard to the parameters of form, the decree establishes that the application of the anti-avoidance rule is exclusively within the framework of the SUNAT definitive inspection procedure, where the inspection area must first obtain a favorable opinion from the Review Committee on whether or not there are sufficient elements to apply the general anti-avoidance rule. The committee can summon the taxpayer to present their arguments and must issue a binding opinion within a period of no more than 30 working days from the taxpayer’s presentation. This procedural structure seeks to provide guarantees to the taxpayer against the application of the anti-avoidance rule.
4. The Power of Reclassification in Recent Jurisprudence of the Tax Court
At the jurisprudential level, the power of reclassification by SUNAT has been the subject of important rulings by the Tax Court that help to delimit its application.
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RTF 6942-4-2024
A relevant case is RTF 6942-4-2024, which analyzed the reclassification of a capital premium capitalization operation. The controversy arose when the taxpayer agreed to receive a lower percentage in a capital premium capitalization than that which corresponded to him according to his shareholding, benefiting a related company.
SUNAT (the Peruvian tax authority) determined that this corporate operation in reality disguised a free transfer of shares and applied transfer pricing rules to calculate the corresponding tax.
On the contrary, the company argued that the capitalization was valid according to the General Companies Act and responded to contractual needs.
However, the Tax Court confirmed the existence of relative simulation, validating SUNAT’s position on the true nature of the transaction and the application of transfer pricing rules.
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RTF 5822-1-2024
Case law has also clarified the relationship between the power of reclassification and other tax rules.
In RTF 5822-1-2024, the appellant company argued that it was operating legitimately as a commission agent under its contract with its foreign affiliate, and that the risks were assumed by the latter. It argued that SUNAT had exceeded its powers by reclassifying the transaction.
The National Tax Administration (SUNAT), for its part, defended the reclassification, arguing that the company performed the functions of a distributor: it had ownership of the goods, it controlled inventories and it assumed financial risks. It considered that the commission contract did not reflect economic reality.
The Tax Court established that the main reason for the ruling was that SUNAT only analyzed the functions, but not the assets or risks of comparable companies in its transfer pricing analysis. As this technical analysis, which was the basis for supporting the tax adjustments, was incomplete, the Court considered that the objection was not duly substantiated.
This approach strengthens the application of Rule XVI as a tool against tax avoidance, while establishing clear parameters for its implementation.
Consequences of Avoidance
- In this line, when cases of tax avoidance are detected, based on Legislative Decree No. 1121, the SUNAT is empowered to demand the tax debt or reduce the amount of balances or credits in favor, tax losses, credits for taxes or eliminate the tax advantage, without prejudice to the restitution of the amounts that would have been unduly returned.
- In addition, it is mentioned that the Board of Directors and legal representatives may be jointly and severally liable for tax obligations when, without having a formal appointment, they exercise a power of management, direction or decisive influence over the tax debtor.
In view of the challenges posed by Rule XVI, which empowers SUNAT to reclassify elusive operations, having specialized advice is key. Our team of tax experts at VAG Global can carry out an exhaustive analysis of your transactions, identify risks and design customized strategies to optimize your tax planning and strengthen your internal controls. This will enable you to minimize observations and sanctions from the authority. Let us be your trusted ally in tax compliance.