Peru – USA Transport Tax Agreement (1988)

Transportation Tax Agreement (1988)

This Treaty was signed on December 15, 1988 and entered into force on December 15, 1988.

The American Embassy to the Peruvian Ministry of Foreign Relations

EMBASSY OF THE UNITED STATES OF AMERICA

No. 1271

The Embassy of the United States of America presents its compliments to the Ministry of Foreign Relations of the Republic of Peru and has the honor to propose that the two Governments conclude an agreement to exempt from income tax on a reciprocal basis, income derived by residents of the other country from the international operation of ships. The terms of the agreement are as follows:

The Government of the United States of America, in accordance with Section 872(B) and 883(A) of the Internal Revenue Code, agrees to exempt from tax gross income derived from the international operation of ships by individuals who are residents of Peru other than U.S. citizens and by corporations organized in Peru. This exemption is granted on the basis of equivalent exemptions granted in Peru to citizens of the United States (who are not residents in Peru) and to corporations organized in the United States (and not taxed by Peru on the basis of residence). In the case of a Peru corporation, the exemption shall apply only if the corporation meets the ownership or public trading requirements of U.S. Law.

For the purpose of this agreement, the Government of Peru will be treated as an individual resident of Peru, and if the corporation is a U.S. controlled foreign corporation, as defined in Section 957(A) of the Internal Revenue Code, the U.S. shareholders will be treated as residents of Peru.

Gross income includes all income derived from the international operation of ships, including income from the rental of ships on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the contract of international maritime transport. It also includes income from the rental on a bareboat basis of ships under contract for international transport by a company engaged in the operation of ships in international transport.

The Embassy considers that this note, together with the Ministry’s reply note confirming that the Government of Peru agrees to these terms, constitutes an agreement between the two Governments. This agreement shall enter into force on the date of the Ministry’s reply note and shall have effect with respect to taxable years beginning on or after January 1, 1987.

Either Government may terminate this agreement by giving written notice of termination through diplomatic channels.

The Embassy of the United States of America avails itself of this opportunity to reiterate to the Ministry of Foreign Relations of the Republic of Peru the assurance of its highest consideration. Embassy of the United States of America

Lima, December 15, 1988

The Peruvian Ministry of Foreign Affairs to the American Embassy

Ministry of Foreign Affairs of Peru presents its compliments to the honorable Embassy of the United States of America and wishes to acknowledge receipt of its note No. 1271, regarding an agreement to exempt from income tax a reciprocal basis, income derived from the operations of international marine transport, and which states the following:

[For text of the U.S. note, see pp. 2-3.]

The Government of the Republic of Peru, given the proposal for reciprocity confined in the preceding note, and given the fact that a reciprocal income tax exemption in maritime transport has been taking place between both countries and, in accordance with Peruvian legislation, agrees to formalize the exemption of income tax on gross income derived from the international operation of ships by individuals who are residents of the U.S. and by corporations set up in the United States which are not taxed in Peru on the basis of their residence. For this purpose residency will be defined in accordance with Peruvian law.

In the case of a U.S. corporation, the exemption shall apply only if the corporation meets the ownership or public trading requirements of Peruvian law.

Gross income includes all income derived from the international operations of ships, including income obtained from the rental of ships on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the contract of international maritime transport. It also includes income obtained from the rental on a bareboat basis of ships under contract for international transport by companies engaged in the operations of ships in international transport.