May 25, 2021
Peruvian tax authority establishes guidelines for application of new thin capitalization rules
The new guidelines clarify when the deduction for interest expenses will be limited and how the new thin capitalization rules apply to recently incorporated companies and companies in the preoperative stages.
The Peruvian tax authority established guidelines (Ruling 015-2021-SUNAT/7T0000) for the application of the new thin capitalization rules for companies with interest expenses during their preoperative stage or companies that recently incorporated.
The new thin capitalization rules, effective since January 1, 2021, limit the "net interest" deduction for corporate income tax purposes to the extent the "net interest" exceeds 30% of EBITDA (i.e., net income after offsetting losses plus net interest, depreciation and amortization) of the previous year. "Net interest" is the difference between interest expense and interest income in a tax year.
The limitation does not apply to companies with net income equal to or less than 2500 Tax units (approx. USD 3 million). Companies incorporated during the same tax year will consider the EBITDA for that year.
Additionally, Peruvian Income Tax Law allows expenses and interest accrued during the preoperative stage to be deducted in the first year of operation or amortized proportionally over a maximum period of 10 years, beginning with the first year of operation.
Peruvian tax authority Ruling 015-2021-SUNAT/7T0000
In Ruling 015-2021-SUNAT/7T0000, the Peruvian tax authority establishing the following:
1. The 30% EBITDA limitation will not apply in the tax year in which an entity is incorporated or begins operations, if the entity's net income in that tax year is less than 2500 tax units (approx. USD 3 million).
2. For entities in the preoperative stage, the following rules apply:
3. Entities incorporated in tax year 2021 but starting operations in tax year 2022 will consider the EBITDA of tax year 2022 for thin capitalization purposes.