On 23 April 2019, the Tax Administration (SUNAT) of Peru issued Administrative rule 033-2019-SUNAT/7T0000 regarding the application of the Peruvian thin capitalization rules which specify a restriction of the deduction of interest on loans where a debt-equity ratio of 3:1 is exceeded.
The rule indicates the case when a resident company received a loan from one of its shareholders who was described as a related party for income tax purposes since the shareholder directly or indirectly owned more than 30% of the Company’s capital.
The rule clarifies the question of whether interest on loans received by a Peru-based company from an affiliate is subject to the thin-cap rules when the funds are used to realize investments that generate revenue from foreign sources.
The rule also notes that Article 37 of the Income Tax Act contains a 3: 1 thin-cap rule governing only income from Peruvian sources.
Under the new rules, the limitation on the deduction of interest does not apply to loans granted by a related party in order to finance investments that generate foreign-source income.
