The Peru tax authority (SUNAT) recently published Report No. 001-2021-SUNAT/7T0000 concerning whether capital gains derived by a resident of Chile are subject to taxation in Peru from the indirect disposal of shares in a company in Peru as a result of the disposal of shares in a company in Chile.

The report notes that under Peru's Income Tax Law, such indirect disposals may be subject to taxation in Peru where certain conditions are met. However, given that the person indirectly disposing of shares is a resident in Chile, the relevant provisions of Article 13 (Capital Gains) of the 2001 Chile-Peru tax treaty must be considered. In this respect, it is noted that although paragraph 4 of Article 13 allows for the taxation by a Contracting State of gains from the alienation of shares in a company resident in that State, this only applies to capital gains derived by a resident of the other State from the alienation of shares in a company resident in that first-mentioned State. In other words, paragraph 4 would allow Peru to tax gains from the direct disposal of shares in a Peruvian company but not an indirect disposal through the disposal of shares in a Chilean company. In this case, the indirect disposal should be treated as property in terms of paragraph 5 of Article 13, which provides that gains from the alienation of any property other than that referred to in the preceding paragraphs shall be taxable only in the Contracting State of which the alienator is a resident.

Based on the above, it is concluded that under the 2001 Chile-Peru tax treaty, capital gains derived by a resident of Chile from the indirect disposal of shares in a Peruvian company as a result of the disposal of shares in a company in Chile may only be taxed in Chile.