A ruling by the Supreme Court of Peru that income from satellite capacity services which rely on Peruvian earth stations and spectrum is liable for income tax is causing controversy in the telecommunications sector, as tax experts argue that the ruling imposes double taxation on satellite providers.
The case surrounds Telefónica’s Peruvian subsidiary and whether the Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT) should have collected income tax for satellite capacity services provided by companies not established in Peru between 1999 and 2004. In a 4-1 ruling, the Court sided with SUNAT, finding that the tax code indicates that satellite capacity services are a Peruvian source of income whenever earth stations and spectrum are used in the country. As a result, satellite capacity services are subject to income tax.
Paradoxically, SUNAT’s case was opposed by its own legal department, which concluded that non-domiciled providers of satellite capacity services couldn’t be considered Peruvian sources of income. Joining them in opposition, Peru’s Tax Court, the Ministry of Transport and Communications, and several tax experts, who warn that the ruling leaves providers open to being taxed on the same income in both Peru and their country of origin.
Satellite services are used in Peru to provide access to Internet, telephony, telemedicine and security services, and are vital in a country with huge areas of difficult terrain and a large rural population. The decision in the Supreme Court could raise the prices of satellite connectivity, which Telefónica has said will affect over 11 500 low-income remote areas in Peru. More than eight million Peruvians live in remote areas that still do not have access to the Internet.