March 15, 2022
Peruvian Tax Court concludes loan proceeds qualify as a payment of services
The Tax Court determined that proceeds from an interest-free loan are a payment for services because there was no intention to repay the loan and the parties agreed that the funds could be used to pay for services rendered in 2013 and services to be rendered in 2014.
In Resolution 03052-5-2020, the Peruvian Tax Court concluded that funds from an interest-free loan are a payment for services.
A Peruvian entity provided services to an unrelated Peruvian consortium for the production of asphalt concrete used in roadway construction. It also provided transportation services and leased construction machinery to the consortium during tax years 2012 and 2013. The services were subject to value-added tax (VAT) because they were rendered in Peru. At the time the Tax Court considered the case, the consortium had not paid for the services provided in 2013.
In 2014, the Peruvian Consortium and the Peruvian entity entered into an interest-free loan agreement. According to the loan agreement, the payment for the services performed in 2013 was going to be offset with the loan funds.
The Peruvian Tax Court concluded that the funds received by the Peruvian entity from the consortium under the loan agreement are payment for services rendered in 2013 and advance payments for the services to be rendered in 2014. The Tax Court also determined that the services are subject to VAT.
The court found that the services were subject to VAT because (1) the consortium and the entity agreed that the proceeds would offset the payment due for 2013 and payments for services to be rendered in 2014; (2) there was no intention to pay the loan; and (3) the loan was intended to avoid VAT in violation of the Peruvian general anti-avoidance rules.