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PERU -- Satellite Regulations -- Abr-2018

Supreme Court rules that satellite capacity provided in-country by non-domiciled satellite operators is a commercial activity subject to income-tax withholding.

Relevant Legal Document:  Supreme Court Ruling No 474-2016 [1]

Date of Ruling: 27-September-2017

Date of Publishing and/or Notification: 26-April-2018

Summary of Decision: tax payers [in this particular case Telefonica del Perú] who qualify as withholding agents and conduct business with non-domiciled entities whose goods [including intangible such as satellite capacity] be utilized in country for its commercial operations, shall withhold income-tax to the relevant non-domiciled entity [in the ruling are mentioned Satmex, Intelsat and Panamsat).

Relevant Parties:  Telefonica del Perú Sociedad Anonima Abierta vs. Superintendencia Nacional de Aduanas y Aministración Tributaria (SUNAT)

Following are mentioned some of the relevant regulatory and technical elements taken into consideration by the Court to decide:

·         The controversy is concentrated in certain withholding taxes that SUNAT considered that Telefonica del Peru -- as withholding agent -- did not take from Satmex, Panamsat and Intelsat since 2002.  The Court analyzes some of the service contracts entered by Telefonica del Peru with the above-mentioned satellite operators and discusses some of the provisions therein to rule on the matter.

·     Declares expressly Telefonica del Peru as withholding agent and the satellite operators as subject to income-tax withholding from the former.

·     The ruling discusses in some detail what a communication via satellite is, based on the documents submitted by other interested parties (a University[2] and an Association of Private Operators[3]) and concludes that a satellite is part of the Telecommunications system needed to complete a communication which uses the national spectrum and therefore the satellite operators benefit from that limited resource.

·     Furthermore, the Court concludes that a satellite system is a collection of tangible and intangible resources -- including the space segment-- and that the transponders built-in the satellite “detect and amplify the signals required for the transmissions”, thus is not a passive element of the communications process, but rather the provision of a complex [Telecommunications] service.

·     Declares it the satellite capacity as an intangible good subject to assignment or any other contractual form i.e. a commercial element used in-country by the satellite operator to obtain an economic benefit.

·     In various parts of the ruling, the Court notes that the satellite operator uses the national spectrum to obtain an economic benefit from a domestic source of income.

IMPLICATIONS FOR SATELLITE OPERATORS, SATELLITE CAPACITY RESELLERS AND LOCAL ICT PROVIDERS:  beyond the specific consequences that the ruling will have for Telefonica del Peru and for the satellite operators mentioned in the decision, it is worth noting that the matter of tax withholding for the commercial activity of providing satellite capacity should be now mandatory as a result of this legal precedent.  It will be advisable to both, satellite operators/ resellers and local ICT providers, to assess the current and future contracts involving satellite services in Perú.

 For further information or any inquire please contact Eduardo J Benitez at ejb@andeanlawyers.com


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