Gary Salazar Paz1
I. Cassation N. 4392-2013 and the Binding Precedent
On October 30th, 2015, the Official Newspaper “El Peruano” published the Cassation related to the file No. 4392-2013 (hereinafter “the Cassation”), issued by the Constitutional and Social Law Chamber Standing of the Supreme Court of Justice of the Republic. This pronouncement generated much controversy about the legal nature and essence of the tax advances, specifically, the payment on account of Income Tax.
The dispute arises because in 2003 the taxpayer submitted a rectification of his annual Income Tax affidavit for year 2001. Subsequently, the Peruvian Tax Authority (hereinafter “Superintendencia Nacional de Aduanas y de Administración Tributaria” or “SUNAT”) issued Payment Orders, on the grounds that interest had been generated by payments to Account of the Income Tax for the months of March, May to December of fiscal year 2002; and, January and February of fiscal year 2003. The support given by the SUNAT consisted in the determination of the coefficient of payments on account to be modified, since this represented an omission for the increased amount not paid. The dispute consisted in determining whether, as a result of the variation in the determination of the coefficient of the payment on account of income tax as a result of the presentation of a rectification of the annual declaration of said tax corresponding to the 2001 fiscal year, to monthly payment obligations that were overdue, would generate the application of default interest on the concepts not paid due to the application of a new coefficient.
The taxpayer maintained the payments on account determined in the frame of article 85 of the Income Tax, being a supposition to the determination of tax. Therefore, payments on account would be acts of determination that produce full legal effects to the extent that they are not modified, and that if changes occur, the legal effects would be future and under no retroactive circumstances.
For their part, the SUNAT and the Tax Court (hereinafter “Tribunal Fiscal” or “TF) considered since the taxpayer omitted to cancel the payments on account as appropriate, by the modification of the coefficient, product of the affidavit of income tax for 2001.
II. Inapplicability of default interest due to differences arising from the increase in the ratio of payments to account in the case of rectification of the sworn statement
In fact, the Supreme Court’s ruling brought with it transcendental provisions, which also seem to clarify long passages and differences between SUNAT’s interpretations and the jurisprudence of the Tax Court. According to the Cassation, the payment of interest arrears with respect to the payments on account of the Income Tax.
[…] the norms of numeral a) of article 85 of the U.S. of the Income Tax Law and article 34 of the U.S. Of the Tax Code, sanction with the application of a moratorium interest for the non- payment of the payments on account of the income tax, which are the demandable and determined in accordance with the provisions of article 85 literal a) of the Tax Law to the Income, but not to the specific case of the taxpayer who submitted rectification of the corresponding affidavit including the determination of the final tax of the taxable year; the moratorium interest is not applicable for the subsequent rectification (carried out in September 2003) of the taxable year 2001 that served to establish the coefficient of estimation of the quotas of 2002, due to the fact that at the time of the payment of such payments, the existing tax return for the previous year was used as a reference. Constituting and producing effects of payments on account for 2002 that corresponded to the said calculation basis […]; and therefore having complied with the two normative assumptions of the legal provisions: the estimation of the quota according to the legal procedure and the timely payment, the moratorium interest does not apply.
The Supreme Court used the literal interpretation method to give meaning to numeral a) of article 85 of the Income Tax Law. To that end, it determined the nature of the payments in the form of payments on account of the income tax, concluding that they consist of “monthly benefits that, by mandate of the law, must be met”. However, it is mentioned that the fact that it is a monetary benefit, besides the fact that it is of a legal configuration, does not undoubtedly determine that it qualifies as a tax.
Likewise, the Cassation indicates that the payments on account would qualify as forced loans, since these can be returned to the taxpayer, in accordance with article 87 of the Income Tax Law; swatting that this characteristic is foreign to the structural elements of the tribute. Regarding the interpretation of article 34 of the Tax Code, the Supreme Court points out that the monthly installments are allocated to interest on arrears as long as they are not paid in due time, since although they are not tribute nature, to which the law has attributed the nature of payment on account of the Income Tax.
Furthermore, the Supreme Court concludes that the application of arrear interest occurs when payments on account are not paid in a timely manner, determined based on elements existing at the time of cancellation of the payment on account, without this meaning that it will generate Interest when the principal obligation is subsequently rectified.
III. Application of the criterion, how has the SUNAT reacted with the Cassation?
As we have pointed out, the Cassation has established binding precedent rules in the fifth paragraph, referring to the forms of interpretation of the tax rules. Nevertheless, the same character has not been attributed to the paragraphs of the fourth recital of the aforementioned judgment. It is precisely the reasoning outlined in the fourth recital in which it is stated that the arrear interest will not be applicable to the subsequent rectification of the affidavit used to establish the coefficient for calculating the quotas for the financial year concerned.
Therefore, although it would have been optimal if the above-mentioned criterion of the fourth paragraph had been established as a rule with an expressly binding precedent, other aspects of the legal reasoning of the Cassation, referring to the form of interpretation of the tax rules to those who received this mandatory attribute under the provisions of article 37 of the Single Text Order of Law No. 27584, approved by Supreme Decree No. 013-2008-JUS (Law that Regulates the Administrative Contentious Process). It should be noted that the aspects of the fifth paragraph, established as binding precedent, also have relevance and direct impact on the specific interpretation of section 85 (a) of the Income Tax Law and on the first paragraph of article 34 of the Tax Code that was developed in the Judgment and, consequently, in its final pronouncement on the subject matter of analysis.
In spite of this, it is logical that the approach of the Tax Administration should be in accordance with what was stated by the Chamber, on the understanding that payments on account of income tax constitute obligations independent of the annual income tax. Therefore, rectification (modification) of the latter would not have to affect payments to account already made in a timely manner by the taxpayer. We reiterate that this is not a modification of a rule, but an interpretation of the provisions relating to payments on account of income tax, which have not changed since the approval of the current Income Tax Act, Through Legislative Decree No. 774. For the same reason, the criterion established in the Cassation may be alleged by taxpayers in tax litigation proceedings (against the SUNAT and the Tax Court) or in contentious administrative proceedings (against the Judicial Power), whenever the same point is discussed. That is, the application of arrear interest in case of payments on account of the Income Tax.
Nevertheless, it seems that for the Tax Administration the issue of interest arrears and payments on account has not been elucidated by the Cassation, because the Supreme Court “would not have referred to the administrative bodies with their decision, as this only would include judicial bodies”. For instance, it is increasingly common to find pronouncements -Intendance Resolutions and Requirements in audit procedures- where the SUNAT directly contravenes the provisions of the Cassation, arguing that the Supreme Court’s ruling does not result from Obligatory compliance for this, as neither the Organic Law of the Judicial Power nor the Law of the Administrative Contentious Process would have given this attribution to the binding precedent.
IV. The way for taxpayers
At this point, it is clear that SUNAT’s position on the Cassation is not the most optimistic for taxpayers, since the former seems to reject -in a flatty way and under the most simplistic argument- that the provisions of the binding precedents of The Supreme Court is only mandatory for judicial bodies, reducing the spectrum of the Cassation and away from the administrative bodies. On the other hand, we consider that the line that is now being adopted by the Tax Administration is contrary to its own acts, being that previously said entity recognized that a binding precedent contained in a Judgment of Cassation, will be mandatory compliance for this, as administrative authority.
Indeed, through Report No. 73-2014-SUNAT-5D100, the SUNAT analyzes the binding precedent established in Judgment of Cassation No. 45-2012 and mentions the following:
In this regard, we must point out that, according to what is stipulated in article 301-A of the Code of Criminal Procedure, judgments issued by the Criminal Chamber of the Supreme Court, constitute binding precedents; which, in light of the provisions of Article 22 of the Single Ordained Text of the Organic Law of the Judiciary, they contain jurisprudential principles of mandatory compliance in all judicial instances. In that case, it is very difficult to assume that the Judgment of Cassation is not general; which, does not prevent its full understanding to proceed to its strict compliance, in accordance with what is established by Article 4 of the Organic Law of the Judicial Power, according to which every person and authority is bound to comply Judicial or administrative decisions in its own terms, without being able to qualify its content or its grounds, restrict its effects or interpret their scope, under the civil, criminal or administrative liability that the law states.
The footnote number 6 of the aforementioned Report states, precisely: “Thus, it could even be understood that said Judgment of Cassation would not be mandatory; which is not in accordance with the provisions of article 22 of the TUP-LOPJ”. In effect, it is clear that for SUNAT the non- adoption of a binding precedent is contrary to the norm; or, at least, it is what was said in that Report.
It should be mentioned that, the Tax Court also seems to share this criterion, although not directly. Even though we have not established any jurisprudence where it is expressly mentioned that administrative authorities should also be governed by a binding precedent of the Supreme Court, there are resolutions where the said body has indicated that in concrete cases it would not apply a judicial decision for not being treated the same as “binding precedent”.
Finally, the lack of arguments in support of SUNAT’s position regarding the Cassation is evident. However, even if that perspective is wrong, it is still contingent on meeting requirements or resolutions of Intendance that support it. As defense against this, we have the above mentioned antecedents. What is happening is that SUNAT and the Tax Court respect the decision of the Judicial Branch only with respect to the specific case of the taxpayer who initiated the administrative contentious process, which eventually resulted in the issuance of a certain Judgment of Cassation. Nonetheless, the same position has been maintained both in the control procedures (in the case of SUNAT) and in resolving the contentious claims of taxpayers in tax litigation (by the Tax Court). Obviously, it would be obliging affected taxpayers to go to the Judiciary to assert their rights, with all the implications (in time and money) that this represents; depriving of legal certainty and predictability to our order.
1 Public Accountant and Lawyer. Masters of Business Administration; Postgraduate in Taxation and Finance; Postgraduate in International Taxation and Transfer Prices from the Universidad Austral in Buenos Aires, Argentina. Associate of IPIDET and IFA – Peruvian Group. Managing Partner of Ecovis Perú.