Global Tax Alert (News from Americas Tax Center) | 14 November 2013

Peru amends Income Tax regulations

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Peru's Department of Economy & Finance has introduced several amendments to the Income Tax regulations.1 These amendments, summarized below, are effective as of 7 November 2013.

Joint responsibility for income tax related to transfer of Peruvian shares

A Peruvian entity will be jointly responsible for the income tax payment on the direct and/or indirect transfer of shares to a nonresident entity, if during the prior 12 months from the disposal date, they were related parties.

The entities will be considered related parties when the nonresident entity owns directly and/or indirectly or through a third party, more than 10% of the equity of the Peruvian entity; or when both entities have a common shareholder that owns 10% of the equity of each entity. They also would be considered related parties if they have common directors, administrators, managers or any other executive with powers of attorney related to financial, commercial and/or operative agreements. In these cases, the entities will be related parties from the time the condition is met for as long as it continues.

Additionally, the entities will be related parties if the nonresident entity exercises strong influence (by the control of all the voting powers required to adopt administrative decisions) in the management of the Peruvian entity and/or vice versa. In this case, the entities will be related parties from the time the administrative decision was made through the end of the following tax year.

Indirect transfer of Peruvian shares

Fair market value (FMV)

To value an indirect transfer of Peruvian shares, the FMV of the Peruvian and foreign shares being transferred will be the highest stock exchange value within the last 12 months before the disposal if the shares were listed; or the equity value from the last audited financial statement before the disposal if they were not listed; or, the FMV determined by a valuation in the absence of audited financial statements.

Cost basis

The cost basis of the foreign shares that have been transferred will be limited to the percentage of equity that the nonresident seller has in the Peruvian entity that is going to be indirectly transferred.

Cost basis rules for Exchange Traded Fund (ETF), American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs)

A specific procedure has been implemented in order to determine the cost basis of the securities received as a result of the liquidation of a participation interest in an ETF, depending on if the taxpayer has contributed securities to establish the ETF or if it has acquired a participation interest in a previously established ETF.

With respect to ADRs and GDRs, the cost basis of the underlying shares received as a result of their liquidation will be the amount resulting from the allocation of the acquisition cost of the ADRs or GDRs between the received shares, when such securities have not been transferred before their issuance. If they were transferred, the acquisition cost of the ADRs or GDRs will be the amount resulting from the allocation of the number of shares received.

Controlled foreign company (CFC) rules and MILA (Integrated Stock Exchange Market – Lima, Bogota and Santiago)

A new mechanism to allocate passive income generated in MILA by a CFC individual resident owner has been introduced.

In this case, passive income derived from the disposal of securities within MILA and accrued by a CFC, will be allocated to the Peruvian resident individual owner, in proportion to the individual owner's entire allocable passive income. The income determined with the aforesaid procedure will be added to the taxable capital gain income at the end of the year, subject to an income tax rate of 6.5%; and the difference will be allocated to the labor income, subject to the income tax rate on the following brackets: (i) 15% from US$ 0.00 up to US$ 35,700 –a US$ 9,250 deduction will apply; (ii) 21% from US4 35,701 up to US$ 71,360; and (iii) 30% on US$ 71,361 and above.


1. Amendments were introduced by Supreme Decree No. 257-2013-EF.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Asesores S.C.R.L, Lima
  • Roberto Cores
    +51 1 411 4468
  • Ramón Bueno-Tizón
    +51 1 411 4448
  • Luis M. Sánchez
    +51 1 411 4444
  • Nora Orihuela
    +51 1 411 4444
Ernst & Young LLP, Latin American Business Center, New York
  • Paola Salvador
    +1 212 773 5545

EYG no. CM3963