Our client signed a concession contract with the Instituto Metropolitano Protransporte de Lima (Protransporte). Since Protransporte had not complied with delivering all of the infrastructure agreed upon for the provision of the collection services. Given the aforementioned non-compliance, Protransporte recognizes the payment of compensation in favor of our client for USD 4,000,000.00. Our client proceeded to classify said compensation as consequential damage (a concept not subject to income tax). Subsequently, the Tax Administration began an inspection procedure for our client regarding the income tax for fiscal year 2012, where it proceeded to redetermine the income tax, classifying the amounts received for compensation as lost profits (concept taxed with income tax ) and not as consequential damage. We got a positive response from the Tax Court, who ordered to the Tax Administration to issue a new pronouncement on the conclusions of the tax inspection. So, the Tax Administration initiated a new income tax inspection procedure regarding fiscal year 2012.In this scenario we suggested and carried out two actions jointly with our client: (i) To file a complaint before the Tax Court against the Tax Administration, arguing that the nullity declared by the Tax Administration was a non-compliance of the Tax Court order, and, (ii) Simultaneously, assist the company in the new tax inspection initiated by the Tax Administration, thorough it was required to support and explain the nature of the payment. As a result of both actions, the Tax Administration accepted that the nature of the payment was of a consequential damage
