Tax Treaty Case Law around the Globe 2020

S. 3Chapter 1 Peru: Financial Transactions Tax within the Scope of the OECD Model Convention?

Esteban Montenegro Guillinta and Mirna Solange Screpante

1.1. Introduction

The Peruvian Tax Court (PTC) addressed whether the Financial Transactions Tax (FTT), in accordance with Peruvian domestic law, constitutes a property tax and, therefore, is within the scope of the Chile-Peru Tax Treaty (2003).

In February 2019, the Peruvian Tax Court decided against a taxpayer seeking reimbursement of FTT paid in Peru because it considered that taxes on property or capital apply to wealth or assets owned and not to wealth intake or expenditure. Basically, the Court stated that the nature of the FTT does not take into account the ownership of the funds. Moreover, the court indicated that it is important to notice that the mere presence of an asset in a taxable operation does not mean that the tax applied qualifies as a tax on assets. In fact, the FTT subjects certain operations to tax that are (or should have been) carried out in national or foreign currency through the financial banking system, but not the money that is passed through the banking system.

S. 4The importance of this case goes beyond Peru, as it ha...