The new legislative decree amends the definitions of tax havens and preferential tax regimes and expands the transfer pricing rules to transactions with entities subject to preferential tax regimes.

On August 24, 2018, Peru's president enacted Legislative Decree 1381, which amends the definition of tax havens and preferential tax regimes for Peruvian tax purposes and extends application of the transfer pricing rules to transactions entered with entities subject to preferential tax regimes.

Definition of tax haven

Under the amended Peruvian Income Tax Law, a jurisdiction is a tax haven or non-cooperative jurisdiction if at least one of the following requirements is met:

— No transparency at a legal, regulatory or administrative level

— No exchange of information, as well as the existence of legal provisions or administrative practices limiting the exchange of information

— No requirement of a substantive local presence, real activities or economic substance

— Low or no taxation

A jurisdiction is a preferential tax regime if at least one of the following requirements is met:

— No transparency at a legal, regulatory or administrative level

— No exchange of information, as well as the existence of legal provisions or administrative practices limiting the exchange of information

— No requirement of substantive local presence, real activities or economic substance

— Low or no taxation

— Tax benefits available for non-residents, but not residents

— Territorial or domestic taxation on an exclusive basis

Application of transfer pricing rules to transactions entered with entities subject to preferential tax regimes

Legislative Decree 1381 extends the transfer pricing rules to transactions entered with entities subject to preferential tax regimes. Previously, the transfer pricing rules only applied to transactions with related parties or residents of tax havens.

The amendments to the Peruvian income tax law will be effective January 1, 2019.

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