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HMRC internal manual

Double Taxation Relief Manual

Peru: Admissible and inadmissible taxes

Income tax (impuesto sobre la renta), but see the note below where profits are taxed by reference to gross receipts or a fixed percentage of gross receipts.

Reinsurance premium tax.


2 per cent surtax for the Food Allowance Fund (Fondo de Compensacin Nutricional).

National Housing Fund (Fondo Nacional de Vivienda - FONAVI)

Extraordinary Solidarity Tax (Impuesto Extraordinario de Solidaridad IES

Tax on gross receipts

In some cases, Peruvian tax may be calculated not by reference to the accounting profit but on gross receipts or a percentage of the gross receipts of a business. Claims to tax credit relief in respect of Peruvian tax imposed on this deemed profits basis will be considered critically.

In particular, the possibility of extraterritorial taxation, that is taxation in Peru of income which, by reference to United Kingdom principles, would be regarded as having its source in the United Kingdom or in a third country should be taken into account. Consequently in cases where significant amounts of tax are paid in Peru, it is important to ascertain what work was actually performed in Peru and what profit, by reference to United Kingdom tax principles, was derived from that work. Only that part of the income from a contract which is derived from the performance of services in Peru will be regarded as arising from trading in Peru, as opposed to trading with Peru.

The distinction is demonstrated for tax credit relief purposes in the case of Yates v GCA International Ltd (`the GCA case’ - INTM161110last sub- paragraph). The GCA case also shows the extent to which tax credit relief should be restricted where taxation is imposed extraterritorially on a gross basis even where the tax as such is in principle admissible for the purposes of unilateral relief.

The general rule derived from the terms of Section 790(4) is that credit for foreign tax on foreign income must not exceed the lesser of the foreign tax and the United Kingdom tax charged on that income. This will frequently result, when the foreign tax is imposed on gross receipts, in a limitation of credit (as in the GCA case) to the amount of UK tax charged on the foreign income. Hence the importance, in the case of significant claims, of establishing the United Kingdom tax measure of the Peruvian income (see INTM168010 onwards and especially INTM168062 concerning management and technical fees).