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July 28, 2023
2023-1322

Peruvian Tax Authority establishes guidelines on scope of applying nondiscrimination clause of the Double Tax Treaties signed by Peru

  • A Tax Authority ruling has distinguished between Double Tax Treaties (DTTs) that Peru has signed with various countries.
  • In some cases, additional language in the DTTs states that the nondiscrimination clause applies to nationals of a Contracting State only if they are also residents of that State.
  • And in other cases, where the additional language is absent, the nondiscrimination clause in the DTTs applies even if nationals of a Contracting State are not residents of that State.

In Ruling 000087—2023, published on 11 July 2023, the Peruvian Tax Authority determined that the nondiscrimination clause included in the Double Tax Treaties (DTTs) that Peru has signed with Brazil, Chile and Canada applies exclusively to nationals of a Contracting State that are residents of said State, whereas the nondiscrimination clause in the DTTs signed with Switzerland, Mexico, Korea and Portugal applies to nationals of a Contracting State, even if they are not residents of that State.

Background

Article 1 of the DTTs signed by Peru (with Chile, Brazil, Canada, Switzerland, Mexico, Korea and Portugal) establishes that the DTTs shall apply to individuals who are residents of one or both of the Contracting States.

Furthermore, the articles of the DTTs containing the nondiscrimination clause specify that nationals of one Contracting State shall not be subject in the other Contracting State to any taxation or requirements that impose a higher tax burden than the taxation to which nationals of that other State are subject.

The nondiscrimination clause in the DTTs signed with Korea, Switzerland, Mexico and Portugal includes an additional paragraph clarifying that, notwithstanding the provisions set forth in Article 1 of the DTTs, the nondiscrimination clause applies to individuals who are not residents of the Contracting States.

Ruling 000087—2023

The Peruvian Tax Authority concluded that, in the DTTs that Peru signed with Switzerland, Mexico, Korea and Portugal, the nondiscrimination clause shall apply for nationals of those States, even if they do not qualify as residents, in accordance with the additional paragraph included in the DTTs.

The Ministry of Economy and Finance also concluded that because the DTTs that Peru signed with Brazil, Chile and Canada do not include the mentioned additional provision, the nondiscrimination clause in the DTTs only applies to individuals who are residents of those States.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Asesores Empresariales S.C.R.L, Lima

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

 

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