March 14, 2022 Peruvian Tax Court addresses how to determine if payments to foreign entities qualify as payments for digital services The Tax Court lists requirements payments to foreign entities must meet to be considered payments for digital services. In Resolution 07792-3-2020 (published February 25, 2022), the Peruvian Tax Court addressed how to determine whether a payment to a foreign entity qualifies as a payment for digital services and is, therefore, subject to a 30% withholding tax in Peru. Background A Peruvian entity entered into a contract with a foreign entity for consulting services that included technical support for data processing software, finance, marketing, consulting global facilities (i.e., advisory services), human resources and administration. The services were performed remotely via phone calls or videoconferences, but the foreign entity could conduct the services without using digital technology. The Peruvian tax authority determined that the services provided by the foreign entity were digital services because there were telephone calls, videoconferences and the use of the internet to perform the services. Resolution 07792-3-2020 The Peruvian Tax Court concluded that the Peruvian tax authority did not analyze whether the services qualified as digital services by considering the circumstances under which the services were provided or the characteristics of the services. The Tax Court observed that not all services rendered via the internet are digital services for tax purposes. To determine if a payment to a foreign entity qualifies as a payment for digital services, the Tax Court ruled that the following requirements established by the law must be concurrently met:
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