The Peruvian Government enacted Legislative Decree 1663 on 24 September 2024, amending the Income Tax Law to introduce rules for determining the fair market value (FMV) of non-listed securities in related-party transactions. This closes a gap in the law, which previously only addressed transactions between non-related parties.

The new rules will come into effect on 1 January 2025.

The decree outlines four methods for calculating FMV: discounted cash flow, comparable multiples, equity value, and appraisal.

However, the discounted cash flow method cannot be used if the transferor owns less than 5% of the Peruvian entityā€™s shares or if the entityā€™s net income from the previous year is below 1,700 Peruvian tax units (approximately USD 2.3 million).

Any FMV determined through these methods must be supported by a technical report, which must be provided to the Peruvian Tax Authority upon request during a tax audit.