In the recent Report No. 000049-2024-SUNAT/7T0000, published on July 9, 2024, SUNAT has determined that, in order to apply the provisions of Decision 578, the income obtained by individuals resident in member countries of the Andean Community (CAN), other than Peru, that originate from digital services must be analyzed in accordance with domestic regulations, the definitions of the TJCAN and the provisions of articles 14 and 16 of Decision 578.
Analysis
By means of this Report, SUNAT determines that for purposes of applying the provisions of Decision 578, the analysis of digital services provided between residents of a CAN member country (hereinafter, “member country”) should follow the following sequence:
- One must start from the Peruvian domestic regulations, which indicate that the digital service rendered by a resident of a member country other than Peru (non-domiciled) will be subject to income tax to the extent that it qualifies as Peruvian source income; this based on articles 6, 7, 9 of the LIR and article 4-A of the LIR Regulations. Likewise, in order to qualify the service, the provisions of Report No. 000039-2024-SUNAT/7T0000 will be relevant.
- When the service qualifies as digital according to domestic regulations, the following provisions of Decision 578 shall apply:
- This agreement will be applicable to parties resident in CAN member countries (article 1 of Decision 578); this being so, the general rule is that the income obtained will only be taxed in the member country where the income has its producing source (article 3 of Decision 578).
- However, in the case of profits resulting from business activities, they will only be taxed in the member country where the profit was made (article 6 of Decision 578).
- On the other hand, with respect to income obtained by companies consisting of professional, technical, technical assistance and consulting services, it will be taxed only in the member country where the benefit is produced; it is presumed, unless proven otherwise, that the place where the benefit is produced is where the expense is imputed and recorded (article 14 of Decision 578).
- While it is true that the provisions of Decision 578 are clear in determining the method by which each income assumption is taxed, in order to fully understand what those provisions include, it is important to take into consideration the decisions of the Court of Justice of the Andean Community (TJCAN):
- Definitions of professional, technical, technical assistance and consulting services (Processes 190-IP-2006, 125-IP-2010, 37-IP-2011, 63-IP-2011, 515-IP-2015, 432-IP-2016, 148-IP-2021):
- Service companies professions. – They are organizations of one or more professionals, which includes persons who have completed at least third level or undergraduate studies, who offer their services for profit.
- Technical services companies. – This is a company that applies technological knowledge through the exercise of an art or technique.
- Technical assistance companies. – They provide the same service as in the previous case, except that it may include the transfer of technological knowledge for the exercise of the art or technique.
- Consulting services companies. – It includes companies specialized in a specific professional area, whose main function is to provide advice in such professional area.
- Clarifications on Article 14 of Decision 578:
- It is based on the principle of effective benefit, leaving aside the principle of producing source contained in the other articles of Decision 578. Therefore, what is relevant will be the place where the benefit of the service rendered is produced, presuming that it will be where the expense is imputed and recorded (Process 125-IP-2010 of the TJCAN).
- The benefit implies the effect of the rendering of the service (Process 63-IP-2011).
- The rendering of the services referred to in Article 14 of Decision 578 can also occur online; regardless of the means of communication or technology used and the degree of human intervention.
- Definitions of professional, technical, technical assistance and consulting services (Processes 190-IP-2006, 125-IP-2010, 37-IP-2011, 63-IP-2011, 515-IP-2015, 432-IP-2016, 148-IP-2021):
The order of analysis detailed in the Report on the matter allows the application of Decision 578 in cases of digital services to be carried out in a joint interpretation of domestic and international regulations and jurisprudence.
Conclusions of the report
By virtue of the analysis described above, SUNAT responds to the consultations with the following answers:
- Is the treatment provided for in Article 14 of Decision 578 applicable to income from network customer technical support and software maintenance services comprising network technical assistance, rendered through digital means (online access), and which require human intervention as an essential element?
SUNAT: Yes, to the extent that they qualify as professional services, technical services or technical assistance, according to the definitions of the TJCAN detailed above.
- Is article 6 of Decision 578 applicable to income from digital services regulated by the Income Tax Law and its regulations that require minimal human intervention?
SUNAT: It must be validated that the service qualifies as digital according to Peruvian regulations, in order to determine if article 14 or 6 of Decision 578 is applicable.
Considerations
The method of analysis and considerations detailed in this report should be taken into consideration for transactions that are intended to apply the provisions of Decision 578; there are also Reports No. 008-2012-SUNAT/2B0000, 027-2012/4B0000, 095-2018-SUNAT/7T0000, which serve as support to understand the implications of these services. Being Peru a member of the CAN, having knowledge of the determinations and considerations of Decision 578 is of vital importance in order for Peruvian companies to properly and efficiently tax their transactions with countries that are also members of the CAN.
At VAG Global we have tax lawyers who are experts in international taxation, who will provide your business with the necessary knowledge to make decisions; we also provide accounting and tax advisory services that will be able to apply the knowledge offered by applying Decision 578 in the operations of your business.
Source: SUNAT i000049 / SUNAT i095