Tax Treaty Case Law around the Globe 2022

S. 223Chapter 21: Peru: The Interpretation of the Concept of Beneficial Owner in the Tax Treaty between Peru and Chile

Esteban A. Montenegro Guillinta

21.1. Introduction

The case under discussion, RTF 03306-9-2020, deals with the application of article 12 of the Income and Capital Tax Treaty between Peru and Chile, which follows article 12 of the OECD Model Tax Convention.

In this case, a Peruvian company paid royalties to a Chilean company for the lease of telecommunications equipment. Both companies were part of the same economic group and had common shareholders. The leasing was part of a change in the commercial strategy, as previously the Peruvian company used to buy the equipment directly from the manufacturer.

The Peruvian tax administration (Superintendencia Nacional de Administración Tributaria, SUNAT) questioned the application of the reduced WHT rate to the lease payments (15% instead of 30%) because it considered that the Chilean company was not the beneficial owner of the royalties paid.

The SUNAT used the exchange of information tools provided by the treaty to analyse the activities of the Chilean company in Chile and concluded that said company lacked substantial economic act...