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    Wind Canon winds are blowing

    March 20, 2023 - CE Noticias Financieras


      Professor at the Universities of the Pacific, UPC and UCSUR. Director of the Master's Degree in Taxation at UPC.

      The Bill (PL) 2939/2022-CR presented last September 1, 2022, proposes the creation of a "wind canon" in order to improve and redistribute the use of wind energy in our country.

      This canon would be created within the context of Law 27056 (current Canon Law) in order to have economic retribution criteria in favor of regional and local governments that have wind energy resources, and thus can manage more funds to meet the needs of their fellow citizens.

      Currently, for example, there is a mining, hydrocarbon, hydro-energy, fishing and forestry canon, but there is no wind energy canon. For this reason, it is intended to include a Title X (Wind Energy Fee) to the referred Law 27056, filling the existing gap.

      This fee would be set at 50% of the Income Tax paid by the owners of the activities exploiting wind resources, and the proceeds would be used only to finance projects and infrastructure works of regional and local impact. In addition, its distribution would be as follows:

      • 40% for the local governments of the district municipality where the resource is located.
      • 30% for the local governments of the province where the resource is located.
      • 30% for the regional governments where the resource is located.

      As an example of an existing royalty, let us remember that we have the mining royalty, made up of 50% of the income tax that the mining companies pay to the State for the use of mineral resources, metallic and non-metallic; but in addition to this, the mining sector must pay the Special Mining Tax, the Special Mining Tax and the mining royalties, in addition to the 29.5% income tax and the VAT, obviously.

      As can be seen, the wind energy sector has not been having a tax burden similar to that of a company in the mining sector. And they want to put things on an equal footing.

      In the mining sector the distribution is very different from the one proposed for the wind sector; let us remember: 10% goes to the local governments of the municipality or municipalities; another 25% goes to the same governments but to the district and provincial municipalities; an additional 40% is distributed among the local governments located within the department or departments of the regions and finally, the remaining 25% is for the regional governments.

      According to analysts, within our country, the regions with the greatest wind resources are Piura, Lambayeque, Ancash, Lima, Arequipa and Ica, the latter being the main one in wind power investment at present.

      In these regions there are already wind power plants as well as plans to implement more; however, there is no economic contribution from the people who exploit the resources in favor of the populations located around these plants.

      Pursuant to Article 3 of Law 25844 (Law of Electrical Concessions), only concessionaires that produce more than 500 KW of electrical energy are obliged to pay the corresponding tax; however, the Wind Power Plants that already exist in Peru exceed the 500 KW required by law.

      According to the opinion of the Energy and Mines Commission, the renewable energy generation business is subject to the common tax regime. Thus, a 29.5% rate is applied for Income Tax - General Regime and a 5% charge is applied to the distribution of profits to shareholders (dividends) who are individuals or non-resident subjects. As a result, all companies that generate electricity using wind energy are taxed at an effective rate of 33%.

      It is important to remember that the nature of the other resources that already have a canon is non-renewable, which is the main reason why their exploitation must be paid to the localities that have such resources. However, the natural wind resource is not exhausted by its use, it is a rather "renewable" resource, so it is safe to say that it is not in a situation equivalent to that of resources such as metals, fishery or forestry products.

      Furthermore, in practice, wind power plants must necessarily have easements on the site where they are erected, regardless of whether the land is privately or State-owned; those who exploit the wind resource will therefore always pay a consideration for the use of the land, contrary to what the LP would claim. All this must be evaluated when legislating on this new fee.

      It should be remembered that the present PL is associated to PL 2454/2021-GL, presented by the District Municipality of Ocucaje, with the purpose of creating a wind energy fee for its district. In the case of both, a majority opinion in favor was obtained last February 28. After that, its debate in the Plenary of the Congress is pending.

      Necessary regulation, but which must weigh the principle of equality in tax matters, for the reasons stated above.

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