Peruvian Congress ratifies Convention to Harmonize Double Tax Treaties of Pacific Alliance

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EY Global
10 Oct 2022
Subject Tax Alert
Categories Corporate Tax
Jurisdictions Peru Chile Colombia Mexico

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  • The Peruvian Congress has ratified the Convention to Harmonize the Double Tax Treaties of the Pacific Alliance countries (Chile, Colombia, Mexico, and Peru).

  • The Convention aligns the tax treatment of pension funds under the Double Tax Treaties of the Pacific Alliance.

On 5 October 2022, the Peruvian Congress enacted Legislative Resolution 31580 ratifying the Convention to Harmonize the Double Tax Treaties of the Pacific Alliance countries (hereinafter the Convention).

Background

On 14 October 2017, Chile, Colombia, Mexico and Peru signed the Convention that will harmonize the tax treatment of pension funds under the Double Tax Treaties of the Pacific Alliance. The Convention was pending ratification by Peru.

The Convention

For Peru, the Convention amends the Double Tax Treaty signed with Chile and Mexico to establish the tax treatment applicable to pension funds. For the specific case of Colombia, as Peru does not have a Double Tax treaty signed with Colombia but a Multilateral Agreement on Double Taxation of the Andean Community, the Convention introduces a Protocol applicable to Peru and Colombia to harmonize the tax treatment exclusively for pension funds.

The main aspects of the Convention are:

  • The term “resident” includes a pension fund regulated by the Contracting State.
  • Interest paid by a Contracting State to a pension fund resident in the other Contracting State may be taxed in that other Contracting State. However, such interest may also be taxed in the Contracting State in which it arises, but the tax shall not exceed the 10% of the gross amount of the interest.
  • Capital gains received by a pension fund from the sale of shares of an entity resident in a Contracting State carried out through the Chilean, Colombian, Mexican, or Peruvian Stock Exchange (MILA Stock Exchange) can only be subject to tax in the Contracting State where the pension fund is resident.

 

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

Ernst & Young Asesores S.C.R.L, Lima
  • Roberto Cores
  • Ramón Bueno-Tizón
  • Ingrid Zevallos
  • Claudia Miranda
  • Krizia Hurtado
Ernst & Young LLP (United States), Latin American Business Center, New York
  • Lucas Moreno
  • Ana Mingramm
  • Pablo Wejcman
  • Enrique Perez Grovas
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
  • Lourdes Libreros
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
  • Raul Moreno, Tokyo
  • Luis Coronado, Singapore

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.