Businesses generally adopt one of the forms included in our local Company Law, which are taxed on its worldwide income. The main corporate forms included in the Peruvian Corporate Law are the following:
Also, generally some businesses carry out their activities using the form of a branch, which is a vehicle that is only subject to tax for its Peruvian income source. The use of a branch is mainly prioritised in the infrastructure sector since there is a need to prove (vis-à-vis the government or other private parties) experience in the construction contracts.
There are also activities that are carried out under joint venture contracts that, mainly, are also taxed as separated entities as well as the branch and the incorporated vehicles. However, there are certain circumstances under which joint ventures are not considered as an independent tax entity.
There are transparent entities that are commonly used when doing business in Peru. That is the case of the investment funds and trusts.
These vehicles do not have any tax liability, therefore they are not considered as taxpayers themselves. Conversely the income generated by investment funds and trust are attributed to their participants or beneficiaries respectively. Consequently, the ones that are obliged to determine and pay taxes are the fund administrator company or the trust administrator.
In order to determine and calculate taxes, the fund or trust administrator should take into consideration the nature of the income obtained and the beneficiary of such income (domiciled individual/legal entity or a non-domiciled individual entity). The tax-payment should be as follows:
It is worth mentioning that there is a special tax regulation with regards to real estate investment funds (FIRBIS – Fondo de Inversión en Bienes Inmuebles) and real estate trusts (Fideicomiso de Titulización para Renta en Bienes Raíces). Under this new regulation, the law grants some benefits with regards to the tax treatment applicable to income attributable to individuals derived from immovable property leasing (subject to 5% instead of 30%), the deferral of capital gains related to immovable property contributions as well as the exemption of capital gains derived from the transfer of certificates in the stock exchange under certain conditions.
As a general rule, when determining the residency of an incorporated business, it is important to take a look at the place of incorporation. This is because incorporated businesses are subject to tax on worldwide income. However, branches and permanent establishments are only subject to taxes in Peru on their Peruvian income source.
Transparent entities are not taxable persons themselves and therefore not considered residents under domestic law.
On the other hand, Peru has signed Double Tax Treaties with several countries, such as Brazil, Chile, Canada, Mexico, Portugal, South Korea and Switzerland, which follow the OECD Model in general terms. Under such international law, the principle rule is that the foreign person would be considered as a resident for treaty purposes if (by means of its place of incorporation, place of management, among others) it is subject to tax for its worldwide income source and not only for its source income in a certain contracting state.
There are other treaties signed with Colombia, Ecuador and Bolivia under the Decision of the Andean Community No 578 which establishes as a place of residents the place of incorporations and the place of usual residence in case of corporations and individuals respectively.
However, there are some specific cases as the Double Tax Treaty signed with Chile where a transparent entity such as a Chilean Private Fund Equity is considered as a resident person for treaty purposes. Therefore, in such case, the Peruvian Tax Administration is obliged to apply the rules contained in the mentioned treaty.
In Peru, business income is tax under a 29.5% tax rate, which is applied to a net income. The same rate and tax basis apply to businesses that are carried out directly by individuals.
The mentioned tax treatment applies also in the case of businesses, which are carried out through a transparent entity. However, in this case the manager of such the transparent entity (ie, fund, trust, etc) is liable for the tax payment.
It should be pointed out that there are special tax regimes (mainly for small businesses) where the business tax rate or business tax burden could be reduced if certain conditions are met.
When calculating the business tax basis, the starting point would be the accounting profits. It should be mentioned that profits are taxed on a yearly and an accrual basis, meaning, at the time the business is entitled to receive a certain income.
However, according to Peruvian Income Tax Law, such amount of profits could vary by means of:
Some of the most principal adjustments (meaning non-deductible expenses for tax purposes) could be the deduction of expenses with persons/entities residing in a tax havens, interests subject to thin capitalisation rules, government fines and depreciation not considering the maximum rates, among others.
Peru does not have a tax regimen such as the patent box. However, regarding the general Income Tax regime, expenses related to research and development (R&D) such as scientific research, technology development and technology innovation projects are deductible for corporate income tax purposes. It must be noted that these expenses could be related to the core business or not.
Besides that, there is a special regimen for Peruvian companies that incur R&D expenses until 31 December 2019. To this regard, these entities may deduct 175% of the expense if the project is developed by the taxpayer himself or through a resident scientific research/technology development/technology innovation centre; or 150% of the expense if the project is developed through a non-resident scientific research/technology development/technology innovation centre. There are some other requirements that should be met in order to get the additional deduction.
However, this regimen has been extended from 1 January 2020 with new tax deduction rates (150%, 175% and 215%) depending on the entities income (under or over USD3 million).
Over time, Peru has implemented some incentives in order to promote certain activities and/or business in certain regions. Some of the main ones are the following
Tax Rate Applicable to Agricultural Businesses
Individuals and corporations developing agriculture (excepting forestall activities) as well as individuals and corporations carrying out an agroindustry business outside Lima and Callao are subject to a corporate income tax rate of 15%. This tax treatment would not apply to agroindustry producing wheat, tobacco, oilseeds, oils and beer.
This regimen has been extended until 2021.
Taxpayers with domicile in the Amazon and carrying out certain activities (agroindustry, tourism, aquiculture, fishing, forestall, among others) in such territory would be subject to a corporate income tax rate of 0%, 5%, 10% depending on the specific activity and territory involved. In any case all corporations domiciled in the Amazon are not subject to VAT in terms of the supply of goods and services carried out within the Amazon.
Tax Stability Agreements
According to this regime, foreign investors and also the local companies incorporated by them are able to sign Tax Stability Agreements with the government that would freeze the current tax regimen that applied at the time the agreement is signed.
It must be said that the tax regime that could be frozen is the one related only to Income Tax. That would include the income tax from the investor’s income (meaning their income tax on the distribution of dividends) and the Income Tax from companies incorporated in Peru (meaning the income of the business income itself). Conversely, the Tax Stability Agreement exclude consumption taxes such as VAT, excise duties, among others.
Advanced Recovery of VAT
Peru has implemented a special VAT regime that allows some taxpayers to recover (in advance) the input VAT that was charged in all its acquisitions.
Under this regime, companies that exceed certain threshold of investments and that are involved in investments projects of more than two years at the preparatory stage (among other requirements) could get an advance payment of the VAT that was charged at the time of the acquisition of goods and services related to such projects.
Therefore, under this special regime, companies should not wait for the operating stage in order to offset their input VAT.
Higher Depreciation Rate in Financial Leasing Contracts
With regards to the acquisitions of fixed assets in the context of a financial leasing contract, the tax law provides the chance to apply a higher depreciation rate in relation to the regular regime if certain conditions are met.
Peruvian tax law provides that the losses generated by a Peruvian-based company may be compensated with the taxed income of the following fiscal year(s). In this sense, there are two systems that can be chosen by taxpayers in order to undergo such compensation:
Once an option is selected, it can only be changed after all the losses are used or terminated. Regarding the carry back losses, the Peruvian tax law does not allow them. According to Peruvian income tax law, there is no difference between ordinary and capital losses.
The general rule regarding the deduction of interest by local corporations is that they will be deductible as an expense for tax purposes as long as the loan related to them was used to acquire goods or services that are necessary to produce or obtain taxed income or to keep up the source of such income.
Nevertheless, in the past, thin capitalisation rules where applicable but only regarding loans between related parties. To that extent, interests were deductible as long as the loan related to it does not exceed three times the net equity of the borrower at the fiscal year closing.
As of 1 January 2019, and until 31 December 2020, the mentioned rule applies to interest related to loans granted by non-related parties, except in the following cases:
Finally, from 1 January 2021, the interest deductibility will be subjected to 30% of EBITDA from the previous fiscal year.
Peruvian tax legislation does not allow consolidated tax grouping and there is not any chance to use separate company losses.
As a general rule, the capital gains of a Peruvian company, will be included as a corporate income that is subjected with a 29.5% tax rate.
Notwithstanding, there are some transactions that are exempt such as the ones made through the Lima Stock Exchange (LSE) if some requirements are met, meaning 10% or more of shares cannot be transferred within a period of 12 months by the transferor and its related parties and the shares have market liquidity.
Financial Transaction Tax (ITF – Impuesto a las Transacciones Financieras) is applied to debits or credits done within accounts in the financial system, and has a rate of 0.005% of the transaction amount.
“Alcabala” or the Real Estate Transfer Tax applies to any transfer of immovable property, even if there is no compensation. The tax rate would be 3% of the transfer value with a deduction of 10 tax units (USD12,500)
Finally, the Valued-Added Tax (VAT) has a flat rate of 18% if incurred in the following transactions:
Incorporated Businesses are subject to Temporal Net Asset Tax. To this regard, companies subject to corporation income tax are obligated to pay a temporary net asset's tax which is imposed on the value of the total of all assets in the balance sheet as of December 31st of the prior fiscal year with a deduction of PEN1 million.
The tax rate is 0.4% and the amount paid for such a tax may be credited against the taxpayer’s income tax. The remaining ITAN after such compensation could be refunded.
Closely held local business are usually carried out through a closely held stock corporation in order to get the limited liability. Conversely, some small businesses are carried out as a business individual person who is taxable as a business, meaning as a corporation.
The corporate income tax rate (29.5%) is, in principle, higher than the rate applicable to individual professionals. Regarding income produced by independent professionals, these are subject to a progressive tax rate:
It must be noted that only the Individual Rate applied to high end of the income scale is higher than the Corporate Rate (29.5%).
Peruvian Income Tax law does not have a provision to prevent corporations from accumulating earnings for investment purposes.
The tax rate applicable to individuals with regards to the distribution of dividends is, in both cases, 5%. The mentioned rate applies to dividends corresponding to profits obtained from 2017 onwards. However, the dividends corresponding to the years prior to 2014 and 2015-16 are taxed at a rate of 4.1% and 6.8%, respectively.
In the case of capital gains deriving from the transfer of shares, the tax rate applicable would be 5% and the tax base would be the difference between the transfer value (at market value standards) and the cost of acquisition. Such treatment would be applicable to domiciled taxpayers.
Non-domiciled tax payers are subject to a withholding tax rate of 30% and the tax base would be the difference between the transfer value (at market value standards) and the cost of acquisition. The mentioned cost in this case should be previously certified by the Tax Administration in order to be deducted.
There is not a special tax regimen for the distributions of dividends by Publicly Traded Corporations in favour of individuals. To this regard, individuals (residents and no-residents) are subject to Income Tax at the rate of 5%.
It must be noticed that the Publicly Traded Corporation must withhold the Income Tax when the distribution agreement is approved by the shareholders general meeting, or when the dividends are effectively paid, whichever occurs first.
In the case of the sale of shares, there is a tax exemption since 1 January 2016 until 31 December 2022. This exemption will apply if the sale is performed through the Lima Stock Exchange, if the seller and its related parties do not transfer 10% or more of shares issued by the Peruvian company within a 12-month period and if the shares have market liquidity.
Where the above-mentioned conditions are not met, resident individuals will be taxed at a rate of 5% over the difference between the transfer value and the shares cost basis.
In case of non-resident individuals, they will be taxed at the rate of 5% unless the sale is executed outside the country, in which case the rate will be 30%. The sale will be considered executed outside the country if the shares are not listed in the Public Registry of the Stock Market.
The Peruvian Income Tax Law has subjected non-domiciled entities withholding taxes. For interests from loans, 4,99%. However, this tax rate would apply only if the borrower proves the effective entrance of the funds in the country and also as long as the interest rate is not higher that LIBOR plus 7 points. In such a case, the excess would be taxed with a 30% tax rate. On the other hand, all the cases of loans between related parties the tax rate would be 30%. This includes back to back structures as well.
For royalties, the tax rate is 30% and for dividends, the tax rate is 5%.
Peru has Double Tax Convention with Canada, Brazil, Chile, Andean Community countries (Ecuador Colombia and Bolivia), Mexico, South Korea, Portugal and Switzerland. On 18 November 2019, Peru signed a Double Tax Convention with Japan. However, in order for such agreement to be in force, it needs to be ratified by the Congress.
We would say that the primary Double Tax Convention's primary countries used by foreign investors are Brazil, Chile and Canada
Although the trend is changing, it not usual for the tax authority to challenge the use of tax treaties. However, since Peru is implementing the rules in order to identify corporation's beneficial owners, it is likely that this scenario will change in the upcoming years.
One of the biggest transfer pricing issues that foreign investors have to deal with is related to intragroup services.
In the past two years the tax rules have suffered some changes specifically with regards to management services and or back office services. Taxpayers should:
If taxpayers do not comply with the mentioned requirements, the deduction could be denied for tax purposes.
It should be mentioned that in cases of low added value services such as back office services, the market value that should be considered for tax purposes would be the amount of costs and expenses incurred by the supplier plus a mark-up of 5%. The excess cannot be deductible for tax purposes.
Despite the fact that Peru has no special provisions for these kinds of arrangements, it has become very frequent that the tax authorities challenges limited risk distribution agreements in transfer pricing audit.
Peruvian transfer pricing rules is in line with the OECD standards. Additionally, Peruvian legislation contains a provision that the OECD transfer pricing guidelines should be used as a means of interpretation when transfer pricing matter come into play.
It is not usual for the tax authorities to make compensating adjustments when a transfer pricing claim is settled. However, MAP has not been operated since it is just a faculty of the Peruvian government.
While a branch of a non-local corporation is subject to tax on its Peruvian source income, a subsidiary of a non-local corporation is subject to tax on its worldwide income.
Both vehicles are subject to a tax rate of 29.5% on their business income and 5% on the distribution of dividends/profits.
However, with regards to the tax applicable to the distribution of dividends/profits, subsidiaries are obliged to withhold taxes at the time in which the distribution agreement takes place or at the time in which the effective distribution is made, whatever occurs first. In the case of branches, the distribution of profits is deemed to happen at the deadline date of the annual income tax return submission.
Additionally, it should be pointed out that the tax base of the distribution of dividends/profits would be the effective distribution amount. Conversely, the tax base of the distribution of profits made by the branches would be the net income.
The tax treatment applicable to capital gains derived from the direct and indirect sale of shares issued by Peruvian corporations is as follows.
The first step will be to determine the cost that was generated at the time of acquiring the shares, for that it is necessary a procedure of “Certificación de Capital Invertido”. This will determine the cost of acquisition of the shares and the deduction with the sales price.
It is important to do this procedure first because, otherwise this deduction will not take part. Also, we must note that this procedure is not applicable when the sale is produced through the Lima Stock Exchange (LSE).
In this case, the tax rate will be 5% if the sale is made by non-resident companies using the LSE; otherwise, the tax rate will be 30%. There are certain cases in which the income could be exempted, as explained in 3.5 Sales of Shares by Individuals in Publicly Traded Corporations.
An indirect transfer of shares would take place if the following requirements are met:
Under Peruvian tax legislation, there is no “change of control provisions”, as such. However, as explained in 5.3 Capital Gains of Non-residents, there is an indirect transfer or disposal of shares, which could trigger income taxes if certain requirements are met such as the fact that 10% or more of the shares of the non-Peruvian corporation, among others.
It should be pointed out that in case of a direct or indirect transfer of Peruvian corporation's shares, such corporation is obliged to report the transfer to the tax authorities.
Additionally, if the transaction involves to non-domiciled parties and the vendor qualifies as a related party at any time in the 12-month period before the transfer, the Peruvian corporation has tax liability with regards to the capital gains derived from the transaction.
Regarding foreign-owned, local affiliates selling goods or providing services to resident companies, the transactions must be set at market value. It must be noticed that in case of transactions between related parties, the market value will be the price that would have been set with independent parties in similar transactions in equal or similar conditions, according to transfer pricing rules.
Regarding the management services, all the expenses must be related to the generation of income. Also, regarding the management fees, it is necessary to present documentation that proves that there has been a service provided to the company and that these represent a gain.
Further, in correspondence with the latest legislation regarding transfer prices, the services with low added value, like the management services, the deduction of expenses that a company can take is equal to the difference between the cost and the expense with a margin of 5%.
As mentioned before, the interest payment applied between related parties is subject to transfer pricing rules, thin capitalisation rules as well as withholding taxes.
With regards to the latter, as explained in 4.1 Withholding Taxes, interest payment to related parties is subject to 30% tax rate, which reduced when applying a Double Tax Convention.
Local corporations are subject to income tax on their worldwide income (Peruvian source income and foreign source income). In this regard, local corporations may sum and offset every foreign income and foreign loss accrued in a fiscal year. If there is a net income determined, it should be added to the Peruvian source corporate net income and be taxed at a rate of 29.5%.
The amount that is not used in the corresponding fiscal year cannot be set-off (or compensated) in others fiscal years, nor can it be refunded.
It must be noted that taxpayers may deduct the foreign income taxes paid due to the foreign-source income levied by the Peruvian Income Tax Law, provided that it doesn’t exceed the amount which results from applying the average rate of the taxpayer to the income obtained abroad, or to the tax paid abroad
Foreign income is not exempt in Peru.
Local corporations are taxed on their worldwide income. To this end, dividends from their foreign subsidiaries are considered as foreign source income, therefore, dividends from foreign subsidiaries will be taxed according to the tax treatment mentioned in 6.1 Foreign Income of Local Corporations.
In the case that an intangible developed by a Peruvian company is used by its non-domiciled subsidiary, the retribution paid by the subsidiary will be considered as a royalty.
As long as the intangible will be utilised outside the country, the retribution will be a foreign income for the local company. It will be added to the Peruvian source corporate net income and be taxed at a rate of 29.5%.
CFC rules applies to a Peruvian resident who controls a non-domiciled entity (non-local subsidiaries) that, according to the law, qualifies as a CFC regarding their passive income.
A non-local subsidiary will be considered as a CFC if it has a legal personality independent from its partners, associates, members or owners, if it is established in tax havens or in countries where the income tax rate is equal to or less than 75% of the income tax rate in Peru and if a Peruvian resident taxpayer participates, directly or indirectly (solely or together with any related party), in more than 50% of the equity, benefits or voting rights of the non-domiciled subsidiary.
In case a non-local subsidiary qualifies as a CFC, the CFC rules will be applied to the Peruvian company who controls it. To this regard, the passive income generated by the non-domiciled subsidiary will be allocated to its local company owner at the end of the given fiscal year, even if it has not been actually distributed. Therefore, the local company may recognise the foreign source income and determine and pay the corresponding Income Tax.
This situation is different from non-domiciled branches because these entities does not have an independent legal personality. Indeed, a branch is one of the offices or groups that form part of a large business organisation.
To this regard, the CFC regimen will apply to income generated by non-domiciled subsidiaries but not by non-domiciled branches.
There are no rules related to the substance of non-local affiliates for Peruvian income tax purposes.
Capital gains derived from the sale of shares in non-local affiliates qualify as a foreign source income. Therefore, it should be added to the Peruvian source corporate net income (if a net foreign income is determined) and be taxed at a rate of 29.5%.
The general anti-avoidance rule was issued in July 2012, however, it was suspended until September 2018, date in which the suspension was lifted.
Under its provisions, such rule allows the tax administration to re-qualify certain legal structures implemented by taxpayers and collect taxes by considering the structure that was intended to be implemented by the parties involved. Therefore, the general anti-avoidance rule tackles corporate structure and/or transactions with the aim or principle aim to defer revenue or to obtain a tax advantage.
In 2019, the government issued the guidelines in order to establish when a certain structure or transaction would fall under the scope of the general anti-avoidance rule. Under such regulation it also established the specific procedure that the tax administration would be obliged to follow when applying such a rule.
It is worth to mention that, despite the fact that the general anti-avoidance rule was reactivated in September 2018, it could be applied to previous situations under the assumption that the anti-avoidance rules was only suspended.
It should also be mentioned that there are specific anti-avoidance rules such as CFC rules, indirect transfer of shares, transfer of shares issued in the context of a corporate reorganisation (spin off/simple reorganisation), among others.
There is no regular routine audit cycle in Peru. The tax administration is able to start an audit (determining the tax debt and imposing fines) during the next four years (if the taxpayer submitted its tax return) and six years (if the taxpayer did not submit its tax return).
However, these periods mentioned would start computing on January 1st of the next year from which the tax return involved would have been submitted.
As it was contained in the statement of reasons of some the most important tax laws issued in the last three years, Peru is focused on implementing some of the BEPS recommendations and so far, it has achieved the following:
Peruvian government is focused on implementing not only BEPS tasks, but OECD recommendations since it would like to be part of the latter one. Under such implementations, the country is seeking to tackle aggressive tax evasion but also tax avoidance in order to get a high level of neutralisation and equality in the field of taxation. It is an objective that has been recognised in most of the statements of reasons contained in the tax laws issued in the last three years as well as in the Multi–Annual Macroeconmomic framework 2020–23.
In the past 30 years, the Peruvian economy has increased significantly as a consequence of different factors. One of them being the development of industries such as mining and the globalisation process.
To this regard, international tax law plays a very important role when establishing clear and mandatory rules in the context of cross-border transactions, which are becoming more and more frequent. In that sense, in the past five years, Peru has been making a big effort to increase its treaty network with key countries, achieving Double tax Conventions with South Korea, Mexico, Switzerland and Portugal, and has been negotiating with other countries in the UKBEPS plays a leading role when designing a tax system aligned with the international legal framework and Peru is committed to do so.
When designing a competitive tax policy, it is important to take into consideration the implementation of BEPS actions in order to tackle tax evasion as well as tax avoidance and that is something that Peru has been trying to achieve over the past three years by setting up some relevant tax legislation.
In that context, as a third world country, such BEPS pressure are balanced with some other benefits or guarantees given to attract foreign investors such as the Tax Stability Agreements, which consists in agreements between taxpayers and governments in order to guarantee that the income tax regime would not be modified in a ten-year period.
As part of the implementation of BEPS, the granting of tax benefits and exemptions are being limited, however, there are some special regimes and exemptions that still remain and that will be in force in the middle term.
Peru has not implemented a legislation for hybrid instruments as of yet.
Peru does not have a territorial tax regime.
With regards to the investment made under debt structure, investments would be diminished since thin capitalisation rules are applicable from 2019 onwards in transactions between non-related parties. Therefore, interest deduction for tax purposes would be limited and, consequently, the investments under a loan granting.
In 2019 and 2020, the interest deduction would be accepted as long as the debt is not higher than three times the patrimony. In 2021 onwards, the interest deduction would be subject to 30% of the EBIDTA.
It should be pointed out that there are some exemptions to the rule such as taxpayers with revenue less than PEN10,500,00 including banks and taxpayers under a public private association, as mentioned in 2.5 Imposed Limits on Deduction of Interest.
Peru does not have a territorial tax regime. As mentioned, CFC rules have been in force since 2013.
Proposed DTC limitation of benefits, as well as anti-avoidance rules, would have a significant impact when involving inbound and outbound investors.
Despite the fact that we have a small treaty network, most of our treaties follow the OECD model (the ones signed with Brazil, Chile, South Korea, Switzerland, Canada, Mexico and Portugal). In these treaties, there are references to the beneficial owner that in the future could limit the benefits of some DTC when the tax Administrations challenges taxpayers to this extent. It should be pointed out that the anti-avoidance standards are taken into consideration in the DTC limitations under negotiation.
To this regard, it must be added that Peru is nowadays implementing the beneficial owner report that resident taxpayers are obliged to submit in order to possible/easer the auditing and the verification of determined treaty use.
There are several transfer pricing liabilities that have been imposed on taxpayers in the last three years such as the submission of the local report, the master file and the CbC report (CbC submission has been regulated in the last months).
However, before such liabilities can exist, taxpayers were obliged to submit a transfer pricing report and exhibit their technical transfer pricing study and therefore all the transactions with related parties. Consequently, we would say there are no radical changes to this extent.
Finally, with regards to the taxation of intellectual property, there are no changes.
In order to achieve a fair taxation and to avoid base erosion and profit shifting, we would say we are in favour for proposals for transparency and information disclosure such as CbC reporting.
However, despite the fact that CbC reporting (among other measures) aim to achieve OECD standards regarding information disclosure, in most of the cases those procedures and its requirements are not well understood/received by the taxpayers, which at the same time do not find a proper way of orientation by the tax administration.
However, we expect that, since these procedures are new ones, these problems would not remain in the future.
So far, Peru has implemented some regulation with regards to digital services, but only around transactions involving B2B structures. Such regulation basically imposes high withholding taxes if some requirements are met.
However, nowadays there are some discussions regarding tax digital services and B2C transactions. Under this new scenario, the tax administration is seeking to impose and claim indirect taxes to digital service suppliers that operate outside Peru.
To this regard, there are no concrete achievements so far.
So far, Peru has not implemented BEPS proposals for digital taxation.
Peru has not introduced provisions dealing with the taxation of offshore intellectual property being deployed within the country.
As mentioned before, royalties related to the deploying of intellectual property is subject to a 30% withholding tax rate in absence of a tax treaty, which in the mainly establish a withholding tax rate of 15% in the case of OECD Model treaties. In case of Decision No 578, the withholding tax rate applicable would still be 30%, but the income should not be taxed in the place of resident taxation under the provisions of such double tax convention.
However, it should be pointed out that royalties paid to tax havens are not deductible for tax purposes.
There are no other general comments.
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